For landlords looking to save money – and who doesn’t? – there are probably two main areas on which to focus attention:
- the purchase of the property to be let and making it fit for occupation by the types of tenant you wish to attract; and
- the management of the let property in a way that maximises your rental income and so helps to ensure the health and success of your buy to let business.
Part 1 of these landlord money saving tips looks at your acquisition of the property to be let; Part 2 considers ways in which you might maximise the rental income from your property.
Location, location, location
It has become a cliché by now, of course, but that does not make it any less critical a decision when it comes to buying a property of any type.
Choose the right location for your buy to let investment and you might have tenants queuing up for the privilege of living there; buy a property even just a few hundred metres away and you might find yourself scraping the bottom of the barrel.
Investing time in the thorough research of suitable locations, therefore, is likely to pay off in the longer term – many online property sites are likely to help build up an impression of particular areas although there is probably nothing to match seeing with your own eyes at street level the immediate neighbourhood of a potential investment property.
If you choose to buy a property that has previously been empty for more than two years, you may be able to make immediate money savings thanks to the government’s drive to bring such homes back into useful life.
The website of the Department for Communities and Local Government describes the principle objectives and the amount of funding that is being made available for the revival of empty properties. Under this initiative, grants and loans may be available from the local authority in your area.
The incentives do not stop there. If you are rehabilitating a property that has empty for two years or more, you may also qualify for a discounted rate of VAT paid to contractors and materials.
A further government website describes how you may qualify for a reduction from 20% to 5% on the VAT levied for works that bring a previously empty property back into residential use – with you as the landlord.
If the property you are refurbishing for the eventual occupation by tenants requires energy saving modifications or heating or security devices for tenants over the age of 60, you may also qualify for the same VAT discount.
Wherever and whatever type of property you wish to buy, the chances are that you are looking for a buy to let mortgage.
It may come as no surprise that the overwhelming advice with respect to this aspect of owning your buy to let property is to shop around for the best mortgage deal.
This lies at the heart of the recommendations offered by the website This is Money, for example, which also cautions a serious look at the fees typically charged for arranging such mortgages just as much as the current borrowing rate.
The mortgage advance itself is typically linked to the anticipated rental income (rather than the market value of the property, as you might expect with a home that is to be owner occupied). For that reason, it is important to keep in mind that your monthly mortgage repayments need to be met from the rental income you anticipate.
What types of tenant?
Your choice of location is likely to be influenced as much as anything else by the type of tenant you want to attract.
The tenants you want, of course, are those who may be relied upon to pay the rent when it falls due. That is an issue you are likely to resolve by checking their references and conducting credit checks. But at the initial stage, you may need to decide whether you want only professional, working people, or students, or those claiming benefits or asylum seekers – all may help to decide the kind of property in which you want to invest.
What are tenants likely to want?
As important as the type of tenant is establishing just what your prospective tenants might be looking for in the property you have to offer.
At Cover4LetProperty we have carried out several surveys relating to this question and have found that, after cost:
- one of the most important features for tenants is the location – so proximity to transport and travel links etc;
- over half of the renters questioned cited ease of parking as an important consideration when choosing a place to rent;
- getting on with the landlord was also particularly important.
What are they likely to pay?
In any market situation there is a conflict – the provider wishes to maximise the return whilst the customer hopes to minimise the price. The relationship between landlord and tenant is no different. As the landlord you may want to maximise your rental income, whilst tenants may hope to pay less.
Resolution of this conflict of course depends on the specific market conditions in the area in which your let property is situated.
Once again, therefore, it may be important for you to conduct a detailed and local analysis of the private rental sector in the area in which you have chosen to invest.
There is little point, for example, in your attempt to maximise rental income by seeking a rent that is out of all proportion to those being paid by other tenants in your area. Once again, therefore, it may call for a degree of research about rents in the area of your chosen investment so that what you hope to charge is not only attainable but also fair.