By Louise Misiewicz
Are you making money from your property business?
How can you increase the ROI from your property portfolio?
This is the second part in another one of my popular property blog serialisations, this time looking at how to make money from property investment – Part One can be viewed here.
Having reviewed the current state of the property investment sector in the UK in previous blog post, and commenced to overview some of the basic hints and tips on how to ensure a consistent ROI, this week I’m focusing on some of the ways in which property investors can thrive rather than just survive.
What tips help property investors to make more money?
There are some basics to consider when it comes to property investment, including:
The Dos and Don’ts of buy-to-let: Anyone can set up a property business and be a buy-to-let landlord, but the first decision to confirm is how much money to invest, and whether that will be a cash sum or whether you want to top it up with a mortgage.
Another key factor is thinking about whether to buy a property close to where you live so it’s easier to establish a more hands-on approach. It’s worth noting that a better yield might be achievable by going elsewhere; somewhere where property is cheaper, or rental properties are in high demand.
It’s important to learn about the area in which your property or properties are situated. For example, properties that are nearby infrastructure links such as railways stations or motorway junctions will be more attractive to tenants, and the property will rise in value by more than other rental areas less well served by various types of public transport.
I also recommend that property investors infrastructure confirm how much rent is being charged on similar properties in the same postcode. You may decide, for example, to undercut other rents locally by a small percentage, to keep your tenants happy and encourage them to stay for longer. I always advise my clients to look for longer-term tenants, as this reduces the time and money investment of finding new tenants.
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This also helps to minimise the risk of a void period between tenants. Costs can really add up here.
Having bought your property, you then need to consider fittings and possibly furnishing it. Buildings and contents insurance is a must, and try to include malicious damage, something that some policies do not cover. I recommend getting a policy that offers emergency assistance as well.
It will save you money in the long term, and tenants will be reassured that they don’t have to wait around before a plumber turns up to fix a burst pipe. Then you have to include fire alarms, gas certificates annually and other property industry regulatory requirements.
Many buy-to-let landlords pay an agency to secure high-quality tenants, because the agent will be responsible for making all the relevant checks on a potential tenant, including their UK residency status and financial creditworthiness.
Establishing a rapport with an experienced letting agent with solid local knowledge is critical, because they can steer you through the process and help you avoid most of the common property letting pitfalls. A letting agent, most importantly, will find another tenant if the existing tenant leaves.
Another important point to remember is to make sure that all tenants are given a copy of the ‘How to Rent’ guide. If you don’t, as a landlord you cannot evict your tenant using a Section 21 Notice if needed to.
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How can property investors make a consistent return?
I believe that another area where some property investors can make potential losses and costly mistakes in their property businesses is around the rules and regulations of the property investment sector.
Navigating the maze of property regulations
I think that leaving the EU will not make that much difference when it comes to regulations affecting property investment, as they will still be in place and impact a property investor’s time and energy.
For example, any development can be proposed for a brownfield site, but foundations won’t be laid until plans have been presented to (and fully approved) by the relevant local authority.
This can take months or even years and there can be objections, which can then lead to a public enquiry. For a property investor this means money spent, precious assets tied up, and future financial uncertainty.
It could even cost them the security and potential life of their property business if knowledge requirements are not navigated in a cost-efficient and timely manner. Our property accountancy team can assist on this.
It is compulsory for a property investor or property investment company to work with a local authority in the UK to agree on Section 106 requirements. These are essentially extra regulations designed to improve the area under development, and can include a property investor or property company having to meet certain additional criteria such as building a new doctor’s surgery or primary school.
Some property industry legislation can be advantageous, including a change of use. This type of regulation allows property investors to alter a large commercial property or land usage into a residential property development instead, and can be an extremely lucrative and profitable part of property investing today.
I have written a number of useful articles for property investors around the key areas of buy-to-let investment and property industry regulations, including:
Next week, I’ll examine further key considerations for property investors to factor into their businesses, including the continuing popularity of build-to-rent and getting your sums right as a property investor.
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