Maximising buy to let returns
There are a number of issues that a buy to let landlord has to handle on a simple operational day to day basis, which if properly considered will make the difference between an acceptable return and an excellent return.
- Occupancy
- Tenancy Agreements
- Building Maintenance
- Property Insurance
- Finance
- Occupancy
If income is your aim then naturally maintaining your level of occupancy of tenants is the key factor. In terms of risk, occupancy is the most important to mitigate. Having your property empty for long periods of time can be damaging in several ways. The areas to address in mitigating occupancy problems are:
- decent locations
- decent conditions
- decent letting agents (if used)
Decent locations should mean that there will be a queue of tenants wanting your property. Nobody likes to live in a bad area if they can avoid it. Better locations mitigate the risk of demographic changes in the area, which can lead to the area worsening and thereby the reducing the willingness of tenants to rent. They also mitigate the risk of capital depreciation for similar reasons.
However, if the location is largely an area of private ownership then capital appreciation, along market trends is not an unreasonable expectation. Therefore, relying purely on the type and price of accommodation can be misleading. For example a three bedroomed terrace at a low price in a bad area can represent a poorer proposition that a two bedroomed terrace at a higher price in a better area. There is always the chance of course that the better area may attract a higher rent.
There is no doubt that starting with a good standard of property and decoration will encourage responsible tenancy. Again, nobody wants to live in a low standard of accommodation and indeed will appreciate that if they spoil it then their tenancy agreement is unlikely to be renewed. Additionally, an initial commitment by you to putting things right will lead to less costs, and fewer maintenance call outs in the future. This means happier tenants and happier buy to let landlords.
If you are not going to organise tenants yourself and would like to hand responsibility on, then a recognised Letting Agent is advisable. They should be able to fill vacancies quickly and maximise occupancy. They should also take a lot of problems away from you by being the first contact for problem calls from tenants.
Letting Agents are not regulated by statute. However members of the Association of Residential Letting Agents (ARLA) or some of the larger chains of estate agents will offer a sound professional service which should result in you not concerning yourself too often with events.
You should expect them to find tenants, organise tenancy agreements, hold deposit bonds for them, collect rents, organise registration of utilities and Council Tax, visit the property regularly (at least 6 monthly) and pay the rent on to you. Charges of 10–15% for this service are normal.
Depending on where your property is located we may be able to
recommend a letting agent to you.
