Top tips for letting a property

Ever since the inception of the buy-to-let concept, many people worldwide have been investing in property to rent out. As a result, a significant number of people have gone on to acquire multiple properties and built robust property portfolios. However some find themselves becoming landlords due to unforseen circumstances. Such as in the case of property acquired through inheritance. Whatever the the circumstances, rental real estate is becoming more and more popular. Our guide on top tips for letting a property is designed to help less experienced landlords. Moreover, it will enable novice landlords understand what makes for successful letting.

1. Buying an investment property is not the same as buying a home

The first thing to fully grasp is that buying an investment property is significantly different to buying a home. As such the criteria for buying an investment property is quite different to what you’d apply when buying a place you would live in. For example, you might have strong personal preferences when buying your home. And these might not be to everyones liking when it comes to rental real estate. When it comes to investment real estate consider neutral and subtle colours and decorations. You can also have a small garden that won’t be too demanding to maintain. Lastly and importantly, treat this exercise as a purely business decision. Furthermore, your decision should be well thought out and not determined by emotions.

2. Location

Great assess locations that are popular with renters should be your first priority when thinking about the location or your investment property. Have a profound comprehension of popular areas and the reason behind that popularity. Examples of factors that sway tenants include; employment opportunities and a good transport network. Additional crucial determinants vary greatly from health facilities, entertainment and shopping centers, as well as schools. Always exercise due diligence and ensure you undertake sufficient research. As such you will know of any factors that might have either an adverse or favourable impact on demand for rental properties in any area.

3. Meeting demand

From family homes to student accommodation, ascertain which type is popular in any particular area. In the event that there is a shortage of any type of property, then consider buying such a property. As a result your investment property will get quick occupancy. Additionally, keep an eye out for any housing developments being built. In most instances such developments result in more supply than demand. This will have an adverse effect on the market and affect future rentals. Always buy real estate you can afford, in a good area with demand, and make allowances for future growth.

4. Rental yield

In the first place remember that your purpose for acquiring an investment property is to generate income. This income is in the form of rentals paid by the tenant for occupancy of the property. The rate of return is known as the ‘yield’ as is reaches by dividing the annual rent by the capital value of the property. Yield is essential as it is a crucial measure of the success of your investment. For example if your property’s capital value is K800,000 and the annual rental income is K80,000, your gross yield is 10%. However, you need to factor in expenses associated with the property in order to reach your net yield. Compare average yields in your potential investment area to determine the viability of investment there.

5. Property values

In addition to rental income, another important consideration is property sale prices. Any possible changes in the sale value of properties will have a huge impact on your investment. Carry out a thorough investigation on sold prices as part of your search. Over time property prices alter, hence this will have a bearing on your overall yield on the investment.

6. Other factors to consider

There are certain mitigating circumstances that can affect your cash flow. As such it is important to note that there will be certain periods where you will experience delays getting a tenant. In addition, actual rental income may end up being lower than anticipated. It is also possible that there will be void periods between tenancies. All these factors can impact what you can afford, you return on investment, your yield and your cash flow.

7. Understand the law

Always be in compliance with the law so as to avoid fines and other harsh penalties that can put a dent in your yield. Ensure that everything with the property is on point and more importantly meets all legal requirements. Also make sure that all legal documents, including a tenancy agreements are in place. All your legal obligations as a landlord must be fulfilled satisfactorily and without cutting corners. Lastly, do all you can to go above and beyond all safety regulations and requirements.

8. Selecting a letting agent

The circumstances surrounding letting agents are a little different to estate agents. To start with your relationship with a letting agent is a long-term one. As such exercise vigilance when selecting a letting agent. Moreover, ensure that the letting agent is professional and effective. In addition they need to be an invaluable asset, especially in the cases of new and inexperienced landlords. Examples of their task include; finding tenants, dealing with financial aspects, complying with legislation and handling maintenance issues.

9. Letting agent service levels

Generally there are varying degrees of services offered by letting agents.

  • Tenant-find means the letting agent’s involvement is strictly restricted to just finding you an tenant. As the landlord you are responsible for the everyday management of the letting.
  • Tenant find + rent collection alludes to a scenario where the letting agent will find a tenant as well as see to the collection of rentals. All other matters are the responsibility of the landlord.
  • Under full management, the letting agent undertakes all aspects of the letting.

Undoubtedly you can manage your rental property and the letting on your own, but you have to fully understand what you’re doing. We strongly recommend acquiring the services of a full management letting agent or agency.

10. Assured shorthold tenancy

Assured shorthold tenancy is the most frequently found form of tenancy agreement. Firstly, this agreement highlights all aspects governing the duties and responsibilities of both the landlord and tenant. Secondly, an assured shorthold tenancy agreement specifies the rental amount to be rendered, as well as the duration of the tenancy. Thirdly, assured shortholds are strongly regulated so have your letting agent explain all aspects in great detail. An accomplished letting agent can come up with a robust assured shorthold tenancy agreement that is in compliance with the law.

11. Rental deposits

At the commencement of a tenancy, a security deposit is rendered by the tenant. This deposit is used to cater for any dilapidation outside of normal wear and tear to the property. The security deposit is held for the entire length of the tenancy. One of the most crucial decisions that has to be reached is with regards to how the security deposit will be kept.

12. Keep an inventory

Prior to the start of the tenancy a full,  thorough and comprehensive inventory of the property and it’s contents should be made. However insignificant this may seem it is important for the sake of avoiding arguments down the line. In addition, this will serve as proof of the state of affairs of things in the property. Furthermore, at the end of the tenancy this record is important to ascertain whether dilapidatiins are payable. The inventory must be confirmed and agreed to by both the landlord and the tenant.

13. Get insurance cover

In conclusion, we strongly recommend a situation where a tenancy is covered by both landlord’s and tenant’s insurance. This will ensure that the building, it’s contents,  as well as the tenant’s belongings are covered. As a result bithvthe tenant and landlord will have peace of mind.

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