10 top tips for successful renting

Now that good mortgage deals are becoming difficult to secure, and the government seems hell-bent on introducing ever more layers of legislation to control the buy-to- let business, it is more vital than ever before to make sure you buy the right property to rent out.

After all, with property prices plummeting fast, the last thing you want is to land yourself with a white elephant, something can neither rent out nor offload at any price. So, in these credit-crunch, belt-tightening times, what do you need to bear in mind if starting or expanding a BTL portfolio in 2008?

Here are my 10 top tips for success in a cooling climate:

Before you even think about buying a property, define your target market very carefully, and decide on the type of tenants you would feel most comfortable with, bearing in mind that there is no property on earth which suits every single rental occupier, and not all markets exist in every area. Ask yourself: am I most interested in aiming at the family market, students, young professionals, the corporate or short-term market, or the social housing sector? Would I be happy to allow children, or a pet such as a dog, cat or caged bird?
Once you have an identikit picture of your ideal tenant, the next thing is to do exhaustive research by haunting letting agents and landlord and tenant websites, to discover which type of properties go fast, and what are the average rents paid, in your chosen area. You are not likely to be able to increase the ceiling rent, however smart or well-appointed your property. The very worst thing you can do in the current climate is to just buy a property and hope somehow you will be able to find high-paying tenants to occupy it. Make sure there is a ready and willing market available before you ever make an offer.
Now, work out your finances very, very carefully. If you cannot pay cash – always the best option when interest rates, but not rents, are on the inexorable up - make sure you have enough money not just for the deposit and buying costs, but also to cover potential voids, repairs and ongoing maintenance. Plus, crucially, enough to cover a possible hike in interest rates. When looking at possible properties, work out all the nastiest figures and go on as many certainties as you can. Never, ever factor in capital growth; this is – as many landlords now know to their cost – little better than backing a horse or buying a lottery ticket. The rental yield must always be able to cover not just the mortgage but incidental expenses, as well as giving you at least some pocket money.
Next, think about the location. The majority of tenants will be people without cars, so your property should be in walking distance of public transport and shops, and in a quiet but safe and pleasant area. Sounds obvious, but many landlords try to go for the cheapest properties, and these are usually in the worst locations. Again, ask letting agents which areas are most requested by tenants, and take their advice on any unpopular or no-go locations.
Now to the actual property. Although location is always more important than the initial condition, the property should be immaculate by the time you come to let it, whatever its condition when you buy it. So, work out how much you would have to spend bringing it up to scratch and whether this amount will still give you a positive cash flow. Also, never buy a rundown property unless you already have a reliable team of contractors you can call on instantly. As with any other business, time is money and you don’t want to buy somewhere in need of total renovation only to find every building firm booked solid for six months.
Should you buy a house or flat? Houses tend to be more expensive to buy and the latest figures from ARLA suggest the rental yields are lower than for flats. Houses also tend to attract sharers, and the more people sharing, the greater the potential problems. Also, with a house, you and you alone are responsible for repairs and maintenance, whereas these costs are shared among all the owners in flats. Further, a house might also count as an HMO, and then you would find yourself landed with all the rules, regulations and fees these now involve.
However, flats come with ongoing service charges, and these can seriously eat into your profit, as there may also be levies or increases from time to time. Local authorities, for instance, can demand a sudden and unbudgeted-for £5 - £10,000 from leaseholders in ex-council blocks to bring an apartment block up to scratch. So, before buying that dinky little flat, check that the service charges are not going to throw all your careful calculations into chaos.
Flats of course come in many guises, from conversions to mansion blocks to purpose-built to newbuild. Conversions often have dingy common parts and some older ones can be extremely tacky. Avoid properties with manky halls and corridors, even when they are cheap, as today’s tenants, with plenty of choice, turn up their noses at them. I have found by trial and error that the properties which let most successfully, time after time, are large studio or one- bedroom apartments on the first or second floor in a purpose-built block where the common parts are neat, clean and tidy with NO bicycles or prams in the hall or corridors. I would also always avoid buying on big estates, especially where there are a lot of kids kicking balls about, or worse. Such properties also often seem suspiciously cheap, but it can be difficult to find good tenants to take them.
If going for a flat, the apartment block should have good security, caretaking services, an efficient system for rubbish removal, cable or satellite TV and be well lit at night. Whenever I am looking I always ask: would I want to live in it myself? I find that trying to picture myself living in the place helps me to put myself in a potential tenant’s position. If a property makes me shudder, I walk away, however much of a bargain it seems to be on paper.
Finally, is there good storage? Somewhere to put a bike? A place for the computer, CD player, television and the vast amount of paraphernalia the average tenant tends to have these days? Is there somewhere to put suitcases? Bedlinen? Towels? Many old houses currently being converted into spanking new apartments have absolutely no storage at all, as the developer is intent on gouging out the maximum number of units and maximising profit. With such developments, there is often no room for a wardrobe or chest of drawers in bedrooms, for instance. Avoid such properties as they will be hard to let.

Remember that, above all, your tenant(s) are looking for a home they can relax and feel comfortable in. Make sure it’s homely at the same time as being smart, contemporary and inviting. It is not easy to find ideal rental properties, which is why BTL landlords should never let up on their search. But bargains do crop up, and you should be in a position to take advantage when they do.

Liz Hodgkinson is the author of The Complete Guide to Letting Property. 7^th edition
published by Kogan Page, £10.99.

Successful Renting Magazine - May 2008