Buy to let is a very lucrative way for real estate investment UK, which can reap rich rewards if implemented through informed knowledge and experience. Real estate investment UK has the potential to multiply the investment but certain things should be kept in mind for ensuring high returns on investment.
There are a number of factors that should be considered before committing into real estate investment UK. In case one is doing it for the first time, then it becomes necessary to be aware of some factors to turn the real estate investment UK into a success.
What should an investor consider before investing?
Lender’s consent is required for letting a property. While some mortgages may not allow to let the property on the existing residential mortgage, others may allow for consent to let. In some cases, a fee may be involved or there may be changes to the current interest rate or the mortgage may allow for only certain types of tenancies.
Specialised rental insurance is needed for landlords which cover the building as well as the contents at the property. It is crucial to inform the lender about expensive items at the property as a higher level cover may be needed for them. It is necessary to get the right policy for letting as the wrong choice may result in serious consequences. The landlord should opt for a policy which provides comprehensive cover and protects the property as well as the tenants. It is essential to have a policy which protects against accidental damage to the property or covers for accidents or injury to tenants or any visitors to the property. Insurance for protection against any loss of rent, including legal costs may also be part of the cover.
It is the legal responsibility of the landlord to ensure the safety of the property that is let to tenants. Landlords should arrange for the required safety checks at the buy to let property and provide tenants with evidence to that effect. There are a number of checks under the law which the landlord is required to conduct at the property in order to ensure and prove that the house qualifies for lettings purposes. Some of these checks include gas safety test and annual boiler service, fixed wiring electrical safety test, smoke alarm test, working carbon monoxide detector anywhere there is a solid fuel appliance or working open fire and portable appliance test. Apart from these, the landlord has to ensure annual services for any oil or solid fuel appliances.
Maintenance and upkeep of the property
Maintenance and cleanliness of a property is vital to renting. A well-kept and tidy property has much higher chances of being let out compared with a poorly maintained or derelict one. Even a better property in a poor condition has less chances of being let out than a property of relatively lower quality, if it is not kept well. The property should always be kept tidy for viewings. If a property is not maintained, it undermines the value of the property even if it is a good one. Apart from viewings, the house should be kept tidy before a new tenant moves in.
Many landlords are professionals or have their own business. In these cases, buy to let acts as their secondary or additional source of income. But buy to let may be a full-time business to some. However, choosing buy to let as the only source of income may have some pitfalls. For example, the property may not remain occupied for the whole of the year, which considerably draws upon the landlord’s resources. There is loss of rental income during the time the property lies vacant, which may prove to be costly as the landlord has to repay the mortgage to the lender and the rental income contributes to it.
Apart from this, the void periods may also undermine the value of the property as a rental property if the void periods stretch too long. For landlords who consider their buy to let property business as their sole source of income, vacant periods at the property may have an even larger impact and put a strain on their financial status. For such buy to let landlords, short-term lettings are a viable solution which help them fill lengthening void periods as a research shows that the average time taken to fill an empty property increased in most regions of England and Wales in September.
Data from lettings software and services provider Goodlord, which produces a monthly rental index, showed that void periods for private rentals increased in seven of the eight regions it looks at.
In the West Midlands the September average was 34 days – more than double the previous month’s figure – and in Wales it was 23 versus 14 in August. London was the only region where the period shortened – to 11 days from 14 the previous month.
Research from Kent Reliance earlier this year found that void periods cost landlords £528 annually and, with general running costs increasing and tax relief on mortgage interest decreasing for higher-rate taxpayers, landlords’ profits are being squeezed.
Short-term lettings can be a way forward for buy to let landlords experiencing void periods. They can help landlords keep their rental properties occupied and ensure a flow of rental income till the time a long-term tenant moves in.
According to data from AirDNA, the average daily rate you can achieve letting a property on a short-term basis is £143 in London, £111 in Edinburgh, £94 in Manchester and £91 in Bristol.
Short-term letting may appeal to a number of groups such as travellers. Families may prefer such lettings as it offers a number of advantages compared with staying at a hotel. They are much cheaper than staying at a hotel and provide an experience of home away from home. Another group of potential tenants may be the travelling executives. But to let is a cheaper alternative for companies looking to accommodate their executives as they can accommodate their employees on business travel at cheaper costs.
So, buy to let investment has lot to offer to landlords and it is one of the most popular options for real estate investment UK. Since the number of renters in the UK keeps on rising, it means an ever-increasing opportunity for real estate investment UK.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.