In today’s challenging market conditions, buy-to-let investing has become increasingly tough for landlords and property investors. Recent data from the NRLA (National Residential Landlords Association) paints a stark picture: while 65% of landlords have increased rents, indicating a vibrant investment market, only 12% of them plan to expand their portfolios further. Additionally, 3 in 10 landlords intend to downsize, signaling a potential decline in the private rental market.
The consequences of this trend are not only detrimental to landlords but also to tenants. As the number of landlords decreases, the overall quality and availability of rental properties may deteriorate. It is crucial to acknowledge these new realities and be upfront about the challenges facing buy-to-let investors. The era of the casual “dinner party landlord” is over, and for many accidental landlords, owning an investment property has become more of a curse than a blessing.
Despite the grim outlook, the fundamentals of property investment remain strong, and the sector continues to hold potential rewards. However, realising those rewards now requires more time, resources, and patience.
One key factor in successful buy-to-let investing is selecting the right property from the start. Switching gears midway through the process is not an option once you are burdened with an unsuitable property that fails to attract tenants or sell.
So how can you ensure that you or your clients have found the right property that meets their unique requirements? At Daytona Property Group, we recognise the increasing importance of property sourcing for landlords. Here are some simple rules we follow to guide landlords in their property search:
- Location: Location truly matters. Is there high tenant demand in the area for the type of property you have found? Look for historical yield, value appreciation, and transaction volumes in the vicinity that align with the property you are considering. Cities like Manchester and Birmingham, often competing for the title of the UK’s “Second City” after London, boast robust demand and capital growth due to the establishment of large offices and employee relocations.
- Energy Rating: With upcoming government regulations on minimum energy performance certificates (EPCs), consider the property’s energy efficiency measures. Check its current EPC rating and determine if any improvements are needed to meet the required standards. Assess the potential cost of these improvements.
- Fair Pricing: Conduct a simple check with the Land Registry to verify the last sale price of the property and its timing. Is the price fair compared to similar properties in the area? Be cautious if the property was recently sold without significant refurbishment at a price significantly higher or lower than your target value.
- Property Condition: Assess whether the property’s internal and external standards would attract the type of tenants you are targeting. If improvements are necessary, consult with a local builder for estimates. Consider if you have the time and funds to complete the required work before renting out the property.
- Tenant Status: If the property is currently tenanted, request proof of tenancy and a rental payment history from the seller or agent. Determine the lease duration and whether the tenant intends to stay. If the tenant is less than ideal, review the lease terms for early termination possibilities.
- Mortgage Status: Find out if the seller has a mortgage on the property and the reasons behind it. If there is no mortgage, understand why the property might be deemed unmortgageable, as this could affect your ability to secure financing or sell the property in the future. If there is a mortgage, inquire about any early repayment charges that may impact the seller’s costs and potentially disrupt the transaction.
By considering these factors, landlords can increase their chances of sourcing the right property that aligns with their investment goals. While market headwinds persist, making informed decisions during the property selection process can mitigate risks and enhance the potential for long-term success in the buy-to-let market.
For expert assistance with buy-to-let investing and property management, visit Daytona Property Group website and discover how their services can support your investment journey.