If you would like any advice on the rental potential of a property you are considering buying call Daniel Bourke on 01582 343209 or email daniel.bourke@belvoirlettings.com
When starting out in buy-to-let, the type of property you choose will not only be determined by how much you have to spend but also where you have chosen to invest and the type of people looking for rented accommodation in that area.
If you are a novice landlord, it is important not be too ambitious with your first acquisition. Consider purchasing what is known within the trade as a “vanilla” property.
These are typically standard 1-2 bed flats and 2-3 bed houses that can be let to families, working couples and single professionals and in Dunstable and Houghton Regis the typical tenant will favour the following:
1 bedroom apartments are favoured by single people who then move on within a year.
2 Bedroom apartments are sought after by young couples looking for their first apartment, who might have a young child or need a second bedroom to work from. We are seeing an increasing number of young couples moving out of London as they decide to start a family and will only have one person’s income. Dunstable has affordable 2 bedroom properties to rent and is still close enough to London.
3 bedroom properties and above will appeal to families. We see more families who have sold their own property moving into rented accommodation until they find a new property to buy or couples in a 2nd relationship who have children already and need the extra room.
Sticking to this type of property and tenant will afford you a much greater choice when it comes to securing a buy-to-let mortgage. Yields on these properties if you have done your homework and purchased wisely, typically average around 6% each year.
According to research the most popular investment choice for landlords remains the terraced house.
Terraced houses tend to be easy to let because they appeal to a wide variety of tenants, they are often fairly economical to run and are regularly situated in towns and cities close to good amenities and transport links.
Semi-detached houses, Victorian/Edwardian houses converted into flats and purpose-built apartment blocks are also firm favourites with renters.
Lots of lenders will not lend on flats in high rise blocks, particularly where the block is council or housing-association owned.
When you become more confident in your abilities as a landlord you might want to consider purchasing properties that generate a higher yield but that generally require more time and understanding to run.
Higher yielding properties are typically harder to finance because they sit outside of mainstream buy-to-let lending criteria. One type favoured by the experienced Landlord is the HMO or House in Multiple Occupation
A House in Multiple Occupation occurs where multiple, unrelated tenants have exclusive access to their bedrooms but share common living areas such as kitchen and bathroom. This type of accommodation is commonly associated with students and professional sharers. The property can be let on either one Assured Shorthold Tenancy agreement or each tenant can have his/her own AST although most lenders will take the former into consideration when making a lending decision.
Some HMOs require a licence from the local authority based on the number of storeys and/or the number of people/households living in the property. These properties also have additional health and safety regulations, so make sure you do your research because lenders will want proof that all the necessary permissions and licences are in place. Running an HMO (regardless of whether it needs a licence) is hard work but the financial rewards can make it worthwhile.
Finally, if you are new to property investment, steer clear of properties in need of renovation until you know what you are doing – unless of course you are in the building trade. Not only do these properties require hard work but you will have fewer buy-to-let mortgage opportunities. You may even need bridging or development finance.
If you would like any advice on the rental potential of a property you are considering buying call Daniel Bourke on 01582 343209 or email daniel.bourke@belvoirlettings.com
