Investing in Rental Property for BeginnersWritten By PropertyLoop February 11, 2021
As can be expected there is a lot to consider when taking your first steps into the world of buy to let investment. Which type of house to rent should you invest in? Do you need a letting agent and is the buy to let market a good investment? Here we help explain to aspiring landlords how to start investing in property.
Is Rental Property Really a Good Investment?
When seeking reassurance on if buy to let is a good investment, some will simply argue that people will always need a home. Recent times are doing little to dispel this seeing soaring demand for rental properties across the UK, with landlords cashing in to recover income lost during the lockdown period. Figures provided by UK Finance have revealed that the buy to let sector is continuing to try and accommodate this increasing demand, with 64,500 buy to let mortgages being taken out across 2020.
While this is a slight fall from the 72,300 buy to let mortgages recorded across 2019, and the 73,300 mortgages taken out in 2018, data has revealed that these landlord mortgages still comprise around 12% of the UK’s mortgage market; with the private rental sector in England alone being over double the size it was two decades ago.
What Is the Best Type of Investment Property?
For owners looking to see more immediate returned on their rental property, it is typically advised that your property is chosen for its ability to generate good rental yields. Typically, this means choosing a larger property that can capitalise don’t his space by providing more tenants with living space, therefore netting the owner more rent each month. This commonly sees owners resort to letting out HMO’s or multi-units, popular amongst those that rent to students.
As opposed to this some landlords may decide to choose a property for its potential capital gains, essential the profit they can make from selling the rental to a new owner. Historically terraced houses have been shown to provide landlords with as much almost a 300% increase in market value over a 20 year period, proving them to be the best option for capital gains returns.
With this being said it is essential not to dismiss the type of tenant that you wish to rent to as these will have differing values in what they are looking for in their future home. Young professionals and full-time students will commonly require city centre locations with good transport links, whereas older renters and those with families like to reside in more suburban areas surrounded by schools, shops and other amenities.
Do I Need a Property Manager to Rent My Home?
It goes without saying that choosing to invest in buy-to-let properties is no small task and some landlords choose to turn to letting agents in order to have their buy-to-let investments managed. Whilst this will of course save the owner of the property time dealing with the occupants of their rental, chasing payments, and handling repair requests, these services come at a high cost.
Agency fees can cost landlords thousands each year, with additional fees being placed at each step of the rental process. Rental property owners can expect to pay letting agents for advertisements, viewings, referencing, creating an agreement, and even charges for collecting rent!
It is also common for letting agents to take a percentage of an owner’s monthly rental income, significantly reducing their annual profit margins and ultimately making it harder to meet any costs that come with repairing the rental, and covering the buy to let mortgage payments.
When letting with PropertyLoop owners will never pay commission. We have revolutionised the letting process to put owners and renters first, budling a trust-based community to make renting transparent and simple. There are no upfront costs, hidden fees or cuts from your income and we don’t charge landlords for the essentials; instead, we offer them at no cost. We will advertise each opportunity to millions of verified renters, reference tenants, provide a legally sound agreement, protect the security deposit and collect rent all for free!
Knowing What Is a Good Property Yield
Naturally when choosing a property to invest in a landlord will need to determine the rental yield they will receive. Simply put this is the amount of rent they can expect to collect from their tenants, minus the cost of the property itself and any additional expenses such as decorating, repairs and letting agent costs.
According to figures provided by Hamptons the average rental yield within the UK is 5.9%, with landlords in the North East typically achieving a higher rental yield than those across the South East and the nation’s capital of London.
When determining the amount of rent you should charge your tenants, the age-old advice of assessing similar opportunities within your area rings true. Assessing the average costs of renting near your property can be an indication of what tenants are willing to pay for, what amenities they expect and if you are putting off potential applicants with high upfront costs.
How can I decorate my Rental Property?
We always advise that when decorating, always go for a neutral colour scheme. The reason for this is so that the tenant can put their own stamp on the property. That way they will feel more at home, happier and are more likely to stay for longer, in turn securing a rental income for longer.
Do the same with the furniture ie buy a wooden or white table, oatmeal or white sofa and light-coloured curtains. Try and buy the best-quality items you can for like, most things in life, quality counts in the sense that it should last longer. This is certainly something worth considering if you’re tempted to opt for a student let.
A fully-furnished rental means supplying all the kitchen white goods, beds, wardrobe, sofa, coffee table etc. If it’s student accommodation then as well as a bed, you will need to supply a desk and chair, perhaps also a lamp too. For families the best idea to offer the house unfurnished as this allows them to take the stuff they have accumulated over the years, out of storage.
PropertyLoop is the world’s first commission free lettings platform. Our platform allows landlords to advertise their rental, reference tenants, curate an agreement, register the deposit and collect rent completely for free! There are no hidden charges, upfront fees or any catches.
Built by experienced property investors and landlords, PropertyLoop connects renters with the owners directly. Your property is featured on all major search and comparison portals as well as advertised by PropertyLoop everywhere else on the Internet. You don’t have to worry about finding the good renters, that’s the job for the platform. Receive offers straight to your mailbox and select the renters that are right for your property. Need access to busy London property market? No problem at all! PropertyLoop is the London market specialist with years of experience and unique knowledge. Whatever your needs are, you can always speak to friendly support staff. Renting property is made as simple as one, two, three.