Fusion Property Investment Services has issued an 18-point guide for would be buy-to-let purchasers. Fusion provides clients with a one-stop-shop solution to residential property investment, but recognises that some investors prefer a more hands-on approach. For this category it gives the following advice:
Make a rational, rather than an emotive decision. Buying a property for investment purposes is totally different than buying a home. Tenants have different criteria for choosing a property than a purchaser.
Do the maths. Divide the net annual rent by the value of the property and if the figure is less than 6-7% walk away. Capital growth is all well and good, but you should be earning a decent income too. Fusion investors typically reap 12% yields.
Donâ€™t over stretch yourself and donâ€™t assume 100% occupancy. Aim to breakeven on a 60% occupancy level and budget for 80%.
Location is everything. Look for regeneration areas with potential for substantial capital growth. Fusion has identified the Chatham area in Kent as on such â€œhot spotâ€?, but they exist throughout the country. These may not be areas where you would chose to live â€“ but you will not be living there. Key factors are amenities: transport, shops and employment. Tenants are usually single, without children. They are more interested in things like convenience stores than good schools.
Check the locality on websites such as www.upmystreet.co.uk to ascertain the frequency of property sales and price trends. If there has been a high percentage of sales and flat prices, there may be a problem with the locality. Local publicans and newsagents are often a vital source of local information.
Employ a building surveyor to check out the property. Ensure you have guarantees and timber indemnities. Check loft installation and double-glazing. Including utility charges in the rent is essential for HMOs (homes of multiple occupancy), where the greatest rentals are to be achieved. You do not want to be incurring massive heating bills.
Look for properties where you can increase the number of bedrooms. This will increase your rental income and the value of your property â€“ which you can then remortgage to unlock capital for future investment. Removing partition walls does not require planning permission.
Speak to local letting agents to evaluate local demand and achievable rents. They will be keen to secure your business and are a mine of market knowledge. Donâ€™t rely on the vendorâ€™s estate agent, they have a vested interest in the sale and are likely to err toward the higher end of a likely rental figure.
Ask the vendor and agent the reason for the sale and their time scales for moving. The reasons may be genuine or will not affect the propertyâ€™s rentability. But time is money. You do not want to be waiting 6 to 12 months for the vendor to find a new home.
Visit the property during the day, evenings, during the week and on a weekday. It is very easy to get the wrong impression of how busy and noisy a locality can be during working hours for example. Check ease of parking. You are about to spend an enormous sum of money. It is worth sitting in your car for an hour or two, reading the paper or catching up on paper work.
Ensure you get gas and electrical certificates before completing a sale. Modern trip-switch fuse boxes may cost up to Â£400 to install.
Rear and side access make building works far easier. End of terrace properties are ideal. There is only one set of neighbours to upset.
Look for small, easily maintained gardens. Few tenants have an interest in hardy annuals. Fusion once spent Â£1,000 removing 14 tones of accumulated rubbish from a garden that filled 5 skips
Install wireless broadband and put a TV socket in every bedroom and equip the property with the right white goods. The more pleasant the property is for your tenants the longer they will stay. Avoid the voids. Void periods when you are between tenants can slash your profit. When tenants stay â€“ they pay.
Interview potential managing agents and chose one that charges an all-inclusive fee. Some charge for a whole host of minor activities.
Get good professional advisers â€“ solicitor, accountant, bank manager, mortgage broker, financial advisors, etc. Fusion will effect introductions or you may prefer to use existing firms.
Employ reputable tradesmen that have been personally recommended. Cowboys are often cheaper than skilled craftsmen â€“ but not always.
Check mobile telephone and TV reception. If they are poor it will annoy tenants and you will face high turnover and possible void periods. Ironically, people do not want to live near telephone masts or power sub stations. The noise from bottle banks can
Fusion Investment Property Services Ltd, 8 Park Lane, Crowborough, E. Sussex TN6 2QN Offices also in London and Bromley
T: 01892 610099 E: firstname.lastname@example.org W: www.fusionproperty.co.uk