Buy to let not to fret

Jason Brand, Director of Brand Vaughan Estate & Letting agents reviews the letting market for Regency magazine

Buy to let has been seen as a secure long tern investment and attracted many new property investors. But the role of landlord is not as easy at it seems.

With the property market in slow down many people have decided to let their homes after finding it harder to sell. This has led to a glut of properties and a fall in rents. Many of these forced landlords will be preparing to let for the longer term.

Jason Brand has come up with a survival guide for current owners

Buy-to-let basics

Before analysing the state of this market it’s important to understand buy to let. The definition is a form of residential investment where you buy a property — normally via a specialist buy-to-let mortgage — and then rent it out.

As well as generating an income from the rent, potential investors hope the capital value will rise over time. So in the best-case scenario the property will be earning money for its owner on two fronts.

Buy to let investors can be secure in the knowledge that their property asset can produced excellent capital growth over time along with the additional potential for income from rent.

Troubleshooting – get the right letting agent on board

There are plenty of difficulties being encountered by landlords at the moment including recent falls in property values, an inability to find tenants, difficulty covering costs and tenants defaulting on their rent.

But none of these should be enough to cause for concern as long as you move quickly to tackle the problems and find workable solutions.

Buy to let is just like running any business so you should expect to face problems, to be successful you need to react quickly to fix them and if you don’t know how to do it yourself then seek advice and management from Brand Vaughan Lettings.

We offer a professional and flexible approach to Landlords and are able to guide clients through the maze of legislation with expert advice

Problem one - Property values have fallen

This shouldn’t be considered a problem. Buy to let is a long term investment and generally landlords should expect to commit to least 10 years or more. Any market turnaround may be slow, with house prices not lifting for a couple of years, however in the 5 – 10 years we will see the house prices grow steadily.

With recent figures now indicating that house prices are now bottoming out many buy to let investors are returning to the market keen to invest their money back into bricks and mortar.

Problem two - Can’t find a suitable tenant

You need to find a letting agent that listens to your requirements and delivers the right type of tenant fully referenced.  The first tenant to say they want the property may not be the right one for you; so we will give you a comprehensive breakdown for you to make the right the decision.

Also what is worth considering is that it’s better to rent it out for £600-a-month than hold out for £650 and have it empty for months.

If you have been searching for tenants yourself, then consider going via a lettings agency that can take on the hassle and stress in exchange for fees that at Brand Vaughan on equate to just 7.5% fully managed. We have a data base of  over 180 active registered tenants and we are able to secure a quality tenant in the shortest possible time.

Problem three – Ensure you cover costs

It is essential to keep costs to a minimum at all times but this is particularly relevant during an economic downturn when every penny counts.

This means analysing your figures and working out where savings could possibly be made.

You need to see what costs you can cut and make a record of your income and expenditure.

This includes looking at ways to reduce mortgage payments in order to ease the pressure on cash flow, such as switching from a repayment deal to interest-only.

It might even be worth considering finding someone willing to invest over a short period to help you out.

Problem four - Securing financing

There’s no doubt that it’s become harder to finance buy-to-let projects but there are still some deals available, according to Brand Vaughan’s financial advisor Jim Maye of JSDP Mortgage solutions.

Existing buy to let mortgages nearing the end of any fixed or tracker rate deal should be reviewed with consideration given to the lenders reversionary standard variable rate as these may be more competitive than current products in the market. Switching a buy to let mortgage from one lender to another may be costly with the limited products on offer but does allow the security of securing a fixed rate that allows the borrower to control monthly expenditure.

We offer FREE mortgage advice and welcome any buy to let enquires

The state of the market

It is important to get you property valued correctly from the start. Lettings prices have fallen with the vast amount of new property coming to the market over the last year. We are also finding tenants are more selective so properties that are well presented are let quicker.

New landlords are viewing this time as an excellent time to start or expanding their portfolios.

Jason Brand can be contacted on 683 111 and is available to advise on all aspects on residential property.