Shining a light on Lettings20th March 2015
At Jackson Grundy our expertise is not limited only to sales; as such we have ‘picked the brain’ of one of our Residential Lettings Managers, Paul Jackson.
What follows is designed to be a helpful and informative overview of what the lettings market can offer you. As with previous posts it details advice based on years of experience in the sector but does not constitute financial advice.
Put simply, there are two main areas to look at from a letting perspective – ‘Buy to Let‘ and ‘Let to Buy‘. To some, the terminology may seem self explanatory, however we feel it is worth going through both options in more detail.
Buy to Let
What should you buy and where should you buy it? There is no stock correct answer to this question as different individuals have experienced varying levels of success with different property types and locations.
What we can do, though, is advise you of some examples of what, in our experience, offers the lowest risk of either not being let or not providing a positive return.
Paul states “We have found that broadly there are two types of property which offer the best chance of a quick let. The first would be any modern property, 1-3 bedrooms in the areas of Hunsbury or Duston (there are others but these come top of the list). Older, predominantly Victorian, properties in areas such as Abington, Kingsley, Far Cotton and St James are the other type of property we advise you look at as a priority.”
The next point, which you may wish to consider, is whether you want to buy a property ‘ready to go’ or if you would consider undertaking a refurbishment project prior to bringing the property to the letting market. In the latter instance you may well be rewarded with a healthier rental ‘yield’ (which we’ll come to in a moment), however there will obviously be a delayed return on your investment whilst you prepare the property for the market.
Paul Jackson advises “If you are looking for the finished article you should concentrate on modern kitchens and bathrooms with showers, good bedroom sizes, gas radiator central heating and low maintenance gardens. When buying to let ask yourself ‘would I be happy to live here’? If the answer is yes then the chances are it will appeal to potential tenants also.”
Rental Yield explained – The starting point when looking to compare properties in terms of potential return is the projected rental yield. Paul advises you look for a minimum yield of 5%. The rental yield can be calculated as follows:
Rent pcm x 12 = annual income
Annual income / sales price x 100 = annual yield
Example: Monthly rental is £650 pcm, purchase price £150,000
£650 x 12 = £7800
£7800 / £150,000 = 0.052
0.052 x 100 = 5.2% yield
There are clearly other financial aspects to consider such as mortgage repayments and agency and legal fees, however the gross yield calculation will allow you to effectively compare properties.
Buy to let mortgages are available and Jackson Grundy offer free advice should you require further information. Our Mortgage Consultants can be contacted on 01604 590170.
Our Residential Lettings experts are also happy to provide free advice on potential rental prices and yield prior to you committing to purchase a Buy to Let property.
Discounts are also available should you decide to buy a property through one of our Sales offices and subsequently let through us.
Let to Buy
Significant numbers of people have taken this option when looking to move with equity in their homes, meaning they are able to keep their existing property as an investment which may help supplement a pension plan or help support family members.
Let to Buy also offers home-owners who are struggling to sell their property an opportunity to move. In these circumstances you need only commit to a 6 month tenancy, allowing you the opportunity to try to sell the property again later, or indeed keep the property longer term as an ongoing investment.
There are a number of requirements which need to be met regarding mortgage arrangements and conveyancing for both Buy to Let and Let to Buy, and every individual case may be slightly different, however the above offers a simplified picture of how it all works.
Finally, when looking for a Lettings Agent we recommend you choose one which is a voluntary member of both ARLA/NAEA and The Property Ombudsman. These are organisations designed to regulate the conduct of Letting Agents and offer recourse should you be dissatisfied with their service.
Paul Jackson and I hope you may have found this piece of some use and Paul can be contacted directly on 01604 621561 for further advice should you require it.