Newby planning a BTL

[werted]

Hello,

I have intiated a thread in the finance section:

http://www.landlordzone.co.uk/forums...ng-a-portfolio

The question I have for this section is how do you experienced landlords advertise your properties, via board outside, web, gumtree?

Also I would like some feedback on having a flat BTL versus a terraced BTL. It would be interesting to know if landlords with mixed portoflios can tell me if there is less hassle with one bedroom professional tenants rather than families living in terraced or bigger houses.
I guess things can go wrong with either but as I am just starting out it would be interesting to know if there is a slightly lower risk option. If there was that is the option I would go for at first and maybe become a little bit more adventurous at a later date.

Thanks

[LesleyAnne]

I think there is a quote here somewhere that goes "Nice car, nice suit, nice chat - no rent"! Sadly you cannot tell who will default on rent, and even carrying out formal credit checks will never 100% guarantee that. A tenant's circumstances may change (relationship breakdown, illness, redunancy etc), which will affect their ability to keep up with rent and look after the property.

As for flat or house - I would say not much difference in rental potential or risk, but you must ensure that if you go for a flat, and it is leasehold, that the lease allows you to let.

I take it as a total newbie, you have done your homework and are aware of all your legal obligations as a LL and how to run and manage tenancies?

[werted]

I think there is a quote here somewhere that goes "Nice car, nice suit, nice chat - no rent"! Sadly you cannot tell who will default on rent, and even carrying out formal credit checks will never 100% guarantee that. A tenant's circumstances may change (relationship breakdown, illness, redunancy etc), which will affect their ability to keep up with rent and look after the property.

As for flat or house - I would say not much difference in rental potential or risk, but you must ensure that if you go for a flat, and it is leasehold, that the lease allows you to let.

I take it as a total newbie, you have done your homework and are aware of all your legal obligations as a LL and how to run and manage tenancies?

Hello Lesley?

Yes I am reading a lot of stuff on lending.
I used to rent in the areas where I live and I know that my ex landlord does very well with the several flats he has up here. I am tempted to follow his model as he seems to have made a good success of it ie. one bedroom flats in a leafy suburb in G manchester. At the moment these flatsd are advertised at something like 68k but on nethouseprices there are bing sold for 53 55k to give you an idea. These seem to rent after three days of being advertised.

I've seen some interesting threads on here and I will keep reading.
One question I have for you, does the elctrical wiring need a PIR after each tenancy ends or is every few years ok? I know gas is every year.

[Spark240]

Electrics do not need a PIR full stop, but you have an obligation to ensure they are safe, how you do that is up to you.

[mariner]

It is rec that you get a full NICEIC? inpsection. Cet valid for 10 yrs.

[Wickerman]

Electrics do not need a PIR full stop, but you have an obligation to ensure they are safe, how you do that is up to you.

Are there any alternatives to an electrical certificate/pir?

You do need to make sure it is safe and the only way to do that is to get it checked.

also - bear in mind that any HMO properties (licensable or not) need to be checked. People tend to forget this.

[Pobinr]

Friends thinking about doing BTL often ask me for tips
I send them this little summary of key points I've put together from 20 years experience:

Buy to let

Location
Bear in mind most tenants are in their 20's.
Majority prefer to live near to City centre, shops, universities etc

Yield
Crucial figure is to aim for 6% yield or more. Yield in % = annual rent x 100/property value
£100k flat letting for £500pcm achieves that. Yields on houses are lower unless you get into HMO's & students.

Expanding your portfolio
One can only expand one's portfolio by raising deposits on borrowed money when the market is rising. As your property's rise you can get them re valued & borrow more against the increased equity back up to 85% loan to value (LTV). Then use that borrowed money as deposit for more properties. That's called 'gearing up'.To start with you need 15% deposit. www.Moneynet.co.uk lists various BTL mortgages.

Flats
Lease needs to be well over 80 years of unexpired term.
Once less than 80 years extention of lease costs more due to marriage value of lease.
Ideally the freehold will be owned by the leaseholders.
Next best thing to owner ship of the freehold is if they've set up Right To Manage (RTM) instead.
Even if they have gone RTM keep an eye on lease length.
All RTM does is prevent management 'rip offs' by the freeholder.
It doesn't negate the need to renew the lease as it heads towards less than 80 years of unexpired term.
If the flat isn't in an RTM block then check the state of the communal areas such as entrance halls & exterior painting to see if that's well maintained.
Occasionally leases are defective such as they aren't worded in the right way to give the freeholder the right to collect maintenance money & manage the maintenance. You need to make sure your solicitor checks the lease wording on this & other points carefully.

Check list to ask estate agent/vendor before flat purchase
1] Do leaseholders own freehold. Or if not have they set up ‘Right To Manage’ (RTM) ?
2] If neither then what is management like ?
3] Check the annual service charge. Should be IRO £600 to £700 pa.

Most important - When you retire & want to sell the flat/s they will need to have about 85 years unexpired term on lease.
Less than that then the solicitors of any potential purchasers of your flat may advise the buyer of that.
At some point flats aren't even mortgageable when the lease gets below a certain amount of term left.
Around 70 or 80 years. It costs money to renew a lease. So you don't want that unless the flat is a bargain.

Gearing
If you borrow 85% LTV you'll be 6.66:1 geared. So your gains on your 15% stake are multiplied nearly 6.66 fold !
Example, if you invested £15k in a £100k flat & then property values rise 10%, your 15k's in an investment that's gone up 10k. That's 66.6% !
Bear in mind though, your losses are multiplied in a falling market. Even then it doesn't matter too much if you don't need to sell at that point because eventually they price would recover. It just highlights the fact that the safest way to invest is have long term view 15 or 20 years or more.

Tenant’s income should be 3 x annual rent. Look at their credit history to see debt level as salary might need to be higher if they have heavy credit loans to pay.

Furniture
People are fussy. Don't want this or that. I got so tired of moving furniture in & out of storage I now do unfurnished apart from furniture that came with flats when I bought them.

Avertising

I advertise on Gumtree & www.Torent.co.uk

Vital questions to ask prospective tenants before deciding to arrange a viewing. I use email as It's frustrating ringing & getting voicemails or being disturbed by phone calls;
When people agree a time to view. Ask them to ring you 30 mins before to confirm they are coming.

Your name:
Your phone number:

1] Date you need a flat ?

2] Are you in full time employment or education and if so what is your job or subject?:

3] Proof of income is req'd if you view then wish to rent the flat. What is your (joint) annual income ?:

4] Please give details of any additional tenants & income if any:

5] Before we rent to anyone we always check their credit history with credit reference agency. Have you always made monthly payments on time for credit card bills, rent, bills, loans& never been taken to court for debt? In other words DO YOU HAVE A CLEAN CREDIT HISTORY ? :

6] Do you smoke?

7] Do you have pets?

8] Are you over 20 years of age?

9] How long do you need a place for ?

10] Any comments or questions you may have