Investing in property is one of the smartest decisions one can make, you can get good returns in the long-term and generate residual income that can support you financially. Over the last 5 years, the number of buy-to-let landlords has increased by a massive 49% from 1.8m to 2.7m. However, the road to becoming a landlord is not just filled with profit. Becoming a landlord can come with its own headaches and risk you need to be prepared for.
In this guide, we will advise you on how to start property investing to ensure a good start in the private rent sector.
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A good landlord who buys property in desirable areas can make huge profits from their rental properties, but this takes time to become a seasoned property investor who knows the best locations and the best type of housing for their goals.
Now we won't tell you there is such a thing as a guaranteed investment, but the property market is less volatile than stocks and other investments. House prices in large cities have been increasing and as a result, the buy-to-let model has seen an increase in the UK in recent years. Similarly, the changing demographics of the UK has meant that there is a demand for rental properties particularly at the lower end of the market.
As mentioned before there are many property investment strategies you can embark on. In this guide, we will only look at some of the more popular strategies and consider pros and cons for each.
Essential this type of investment strategy can result in you the landlord having someone else pay for your mortgage for you and you can benefit in the long-term capital growth of owing the property. If you are able to buy the right property at the right price, your tenants who are paying rent each month can be sufficient to cover the mortgage payments. The downside to this strategy is you will need a lot of capital for a buy-to-let mortgage around 25% of the property value as a deposit.
Traditional long-term residential let.
If you buy at the right price and your rental income covers your mortgage payments, then you can effectively have a property for free and can look forward to the capital appreciation of the asset. However, the substantial increase in UK house prices has meant that the prices of properties are now often out of balance with rental income potential. We have a wealth of experience in this area so we regularly look for high-yield properties on behalf of our landlords to add to their portfolios.
Another form of buy-to-let is student accommodation, these properties are a little different from the traditional home. The lounges and and sitting rooms ore often than not have to be converted to bedrooms and communal spaces need to be created. The benefits of this is that a large property split into rooms can generate more income than renting the whole house to a single-family. The key to a successful student let is buying in the right location near universities and close to all student amenties.
These are 'houses in multiple occupations' and these properties come under special government rules. Under the changes in the Housing Act 2004, if you let a property which is one of the following types it is considered an HMO:
This is where you let your house out to employees (often from the same company). The company itself may actually be the tenant. Corporate tenants are likely to be safer tenants who will conduct themselves in a professional manner and the risk of rent arrears is reduced. The wear and tear on the property will also be reduced as corporate tenants generally have their own homes they will stay at over the weekend.
The idea of owning your dream home and then letting it out during the year to cover the cost is a very appealing idea. Holiday lets can also generate higher levels of rent per week/month than a comparable residential let property.
Now we have gone over the way you can invest in properties, we need to tackle what you need to ensure you are a good landlord. These usual come under human habitality, fire regulations, electrical and gas safety. Regardless of what property you will be letting, not following these regulations to the word could put you on the wrong side of the law.
Your tenant needs to be warned if a fire breaks out in the property and also have means of escape. This means as the landlord you need to ensure there are fire alarms on every level of your property and exits are kept clear so tenants can leave the property quickly in an emergency.
You will need a gas safety check every year to to ensure that all gas appliances, pipes, and flues are in safe working order for your tenants.
EPCs are used to measure how energy efficient a home is and this is very important when letting out as tenants are now looking for eco-friendly properties and new legislation from 2025 requires every property to reach a certification of C or above.
Before a property is let, you need to ensure you have carries out an EICR to ensure that all electrical appliances and installations are safe for tenants to use. Surprisingly in the UK, there is no regulated inspection requirement for this but if someone is hurt using an appliance in a property you let. As the landlord, you will be held liable.
When you let a property and take a deposit, this must be stored in one of the three deposit protection schemes which have been sanctioned by the government. This ensures that the deposit is held fairly for both parties should any disputes arise.
You must ensure that every tenant has the right to rent a property in the UK. As you can imagine, this has become doubly important since the advent of Brexit. Now every EU citizen must be checked thoroughly, to ensure that they are able to reside in the UK.
Who is responsible for the let and tenants?
Estate Agents for full property management - This is for those who want to keep their hand clean and let an agent carry out work for them and ensure all regulations are adhered to and tenants are sources.
Manage it yourself - Unless you are a seasoned property investor this option may not be suitable as you will need to be aware of all legislation and and take full responsibilities for everything including phone calls from tenants at midnight.
Let us help you - We have a property management service for landlords by landlords. This means we are more affordable than the estate agents and we have experience helping landlord increase their portfolios and increase residual income from their lets.