How To Invest For Income
Today we’re continuing on the theme of buy-to-let basics and how to develop your income strategy. When I first started out, my first 10 properties were income producing buy-to-lets, which is definitely something we would advise doing as houses of multiple occupancy (HMOs) are a more challenging endeavor to take on. When you’re buying a property with the intention of letting out to an occupant/couple/young family, the specification of the property should depend entirely on who exactly you’re looking to attract.
Figuring Out Your Ideal Tenant
In our previous feature, we talked about the research that goes into finding your ideal area. Once you’ve found it, you need to be looking at a potential property with the eye of who is going to be living there. Are you trying to attract blue-collar workers, white-collar workers or semi-professionals? You should have an idea of who generally lives in the area of your potential property, so you should know that answer already. Depending on the work your tenant does, they’re going to be looking at certain areas to live in. A blue-collar worker may not desire the property to be of a very high standard, but it should be clean, neat and tidy with good transport routes. A semi-profession sits in the middle and may be looking to be near to the business district with more middle of the road rent, perhaps also not requiring any parking. White-collar workers may be more likely to look for the highest spec with parking facilities and higher rent. Couples or a young family will likely want a house where they feel safe, with parks and schools close by. Personally, if we’re looking to rent to a young family we would discount two-bedroom homes as with young families there’s always the possibility of another child. The last thing you want is for a great tenant to leave because you don’t have a third bedroom.
The Downside Of HMOs
House sharers are generally more transient. They spend more time coming and going, which is generally why we would advise to stay clear of these types of properties in the early days of building your portfolio. They have increased wear and tear on the properties, increased administration, you have the risk of a room being empty if you haven’t been able to fill it straight away and they obviously also generally require furniture to be already in the house. When you buy a property with the vision to turn it into a HMO, you need to go through a legal process to obtain planning permission. Some councils will want to prevent an area from containing any shared properties, or limit the amount in a specific area. The increased administration generally also relates to student tenants being exempt from council tax, you may have to pay the utilities for them and they may also need a guarantor. When you’re starting out, learning all of these necessities can have the potential to be overwhelming, which is why your first experiences should be learning from baby buy-to-lets. Houses of multiple occupancy can be powerful tools, but they are troublesome so it’s definitely a balancing act! Save these for when you have more of an income and proven success raising private finance.
Our Top Tips For Good Property Management
There are landlords out there who have given the role a bad reputation, however there are definitely things you can do to be one of the good guys. You want to buy to meet tenant demand and try to become a recommended landlord. In the initial stages before a tenant moves in, pay the money to get some professional photos taken. The property will receive a quicker uptake if the photos look good, with a much better first impression of the property. Set a good precedent by dealing with the financial side of the letting swiftly by not letting a tenant move in unless their deposit and first month’s rent has been paid before receiving their keys. You can revise your tenancy documents as you go if there are disputes about issues along the way. For example if the property has a garden, but there’s no clause in there to stipulate that the tenant needs to maintain it, if you find it’s later going to take a few hundred pounds to correct you might then wish to revise the tenancy for next time. You certainly learn well from having bad tenants so it’s not a bad thing to experience, although it may be frustrating at the time. Try to keep up with monthly inspections of the property and ask the tenant if there’s anything you need to be aware of that might become an issue in the future. Make sure the property is insured and compliant with fire regulations! And lastly, ask the tenant if there’s anything that can be done to improve the property.
We hope you’ve found this article helpful in developing your strategy on investing for income! If you have any questions at all following this topic, please do get in touch as we’d love to hear from you. You can reach out to us on our social channels or by emailing at info@djfam.co.uk. If you’re in need of bridging finance for your next project, or you’re looking for advice on a new project, we’d love to hear from you.