Thinking of becoming a Buy to Let landlord in Cardiff?

Since the introduction of TV programmes such as ‘Homes Under the Hammer’ and ‘Property Ladder’ the number of individuals who have ventured into the buy-to-let industry has boomed.

And for those who haven’t yet been tempted, is now the perfect time to take the plunge?

My research indicates that demand will out-strip supply for much of 2011/2012 and with a study by Paragon Mortgages reporting that for the majority of landlords yields are up and void periods are down, is now a fantastic time to become a landlord?

Add to this the number of young adults in ‘Generation Rent’ who believe that they are unlikely to ever buy their own home and becoming a landlord appears to be an increasingly attractive option. With saving interest rates so low and the stock markets in such a volatile state, investing in property seems to be a very sensible option, but sensible has to be the operative word. Like any other decision that involves a large amount of money, buying a property to let should be a carefully thought-out process.

Therefore, here are some of my top tips for first-time landlords:

• Load up on location knowledge – The statistics paint a rosy picture of the health of the overall rental market, but some areas are doing better than others so consider location very carefully. Property expert Kate Faulkner advises first-time landlords to talk to local lettings agents about the area and the type of properties that are most popular with tenants.

• Explore the average rent for the area – Once you’ve chosen the locality in which you want to buy and decided what type of property it is you plan to purchase for a particular kind of tenant do your research to discover what the average rent is. Tenants are still looking to get the best deal so keep your rent levels competitive to avoid pricing yourself out of the market.

• Do your checks – Before you start thinking about keeping the tenant happy you need to be happy with the tenant. Make sure you (or your agent) carry out full references and credit checks and get a guarantor.

• What do tenants want? – If you really want to stay one step ahead of your competitors and avoid those dreaded void periods go the extra mile to find out what the tenants you are targeting really want. Common sense will tell you that if you have a three bed property marketed at young families then storage should be high on the list of essentials. Ask the local lettings agent what they are often asked for and talk to friends who may be renting to get their point of view.

• Do your research – First-time landlords must not underestimate the value of thorough research. It is especially important if you don’t plan to use a property management company as it will be your responsibility to deal with any issues that arise during the tenancy. For example, you will need to be able to call upon a tried and trusted plumber should anything happen to the pipes. Even if you decide to take a back seat and allow an agency to manage your property, researching property law will give you peace of mind should you be presented with a legal situation.

I would encourage anyone who is in a position to do so to consider purchasing a property to rent, despite the horror stories, if you buy the right property and use a good lettings agency, buy-to-let can be a relatively hassle-free investment strategy.

BUY TO LET INVESTMENT – AS EASY AS ABC!

BUY TO LET INVESTMENT – AS EASY AS ABC!

There has never been a better time for investors to take full advantage of the resurgent and profitable Buy-to-Let property market and to help novice investors with their first step on the rung of the property ladder here’s my ABC on the language of Buy-to-Let, with tips and advice on how to get started.

The current market remains buoyant, Independent financial research by Datamonitor indicates that Buy-to-Let mortgages will flourish more than any mortgage in the next three to four years.

To help new investors make the right decisions about their property purchase, Belvoir offers free, initial advice and guidance to anyone wanting to understand more about what and where to buy in Cardiff and surrounding areas, the risks and rewards of Buy-to-Let and the mechanics of property letting, such as referencing tenants, letting the property legally, on-going maintenance and protection of the property.

The four key stages for any investor are:

Buying the investment property

Preparing the property to let legally and for maximum rent

Letting the property

Cashing in on the investment, by selling or taking income

A knowledgeable Buy-to-Let investor is more likely to be successful financially. In line with other types of investment such as cash, bonds and share ventures, people interested in Buy-to-Let are generally a lot more savvy now than they were ten years ago. But the market has changed and investors need to understand fully what they are entering into and what they can expect to get out of it.

To that end here’s an A-Z glossary to help future Buy-to-Let investors understand the key phrases and issues they need to be well briefed in.

n  Assured Shorthold Tenancy Agreement – A contract between the landlord and the tenant which provides limited security of tenure to the tenant and an absolute right for the owner to take possession.

n  Below Market Value – In theory this is buying a property at a price lower than it would sell on the open market. In reality a property is worth what someone can afford to pay for it at the time of sale.

n  Capital Growth – The rate at which the value of a property increases over a period of time. (According to Nationwide this is around 3 per cent net of inflation annually.)

n  Deposit – A sum of money paid by the purchaser towards property purchase. Currently averaging at around 25% for new buy-to-let mortgages (Council of Mortgage Lending).

n  Equity – The current market value of the property less outstanding mortgage.

n  Fire Safety – An essential consideration for any Buy- to-Let landlord. Definitive guidance on a landlord’s responsibilities is provided by the Local Government body, LACORS (www.housing@lacors.gov.uk).

n  Gearing – Describes overall equity levels within a property portfolio and indicates the debt level against its value. If gearing is high there is very little equity in the overall portfolio. If gearing is more than 75% a Buy-to-Let investor may find it difficult to re-mortgage.

n  Housing Act – Lays out current legislation and standards for housing conditions and the assessment of hazards.

n  Inventories – Carried out at the start and end of a tenancy, they not only list all fixtures, fittings and furnishings, but also record (photographically) the condition - and any subsequent damage to - each item. Important in disputes.

n  Joint Application – Proposal for shared ownership of a property by two or more people who subsequently take joint responsibility for repayment.

n  KFI (Key Fact Illustration) – Explains all terms, conditions and features of the mortgage - cost of the mortgage, monthly payments amounts, interest rates, penalties etc.

n  Licenced House in Multiple Occupation (HMO) – A brief description of a HMO is a properties let to 3 or more tenants, who are unrelated and not from the same direct family, and who share facilities such as toilet bathroom and kitchen. Special regulations apply to HMOs particularly in the Cathays area of Cardiff.  

n  Monthly Repayment – Set money paid each month to the lender for the outstanding loan balance.

n  Net Rental Yield – This is a post-purchase calculation of the total rent received minus the expenses the property incurs, expressed as a percentage of the property’s value.

n  Outgoings – Current outstanding debts such as mortgage, insurance, maintenance fees etc.

n  PAT Safety Testing – The Electrical Equipment (Safety) Regulations 1994 requires that all mains electrical equipment (cookers, washing machines, kettles etc.) supplied in rented accommodation must be safe. Landlords should have all equipment checked at the start and end of each let and obtain and retain test reports.

n  Qualified Mortgage Broker – Qualified to provide expert advice on the mortgage products available to a landlord. Some are independent whilst some are tied to a financial institution.

n  Rent arrears – Payments received after the date due or after the services have been provided.

n  Stamp Duty Land Tax – Payable when land/property is purchased for more than a set price.

n  Tenancy deposit schemes – Since 2007 all deposits taken by a landlord must be safeguarded by one of three Government approved schemes. Landlords are free to choose which one they use.

n  Utility bills – Landlords must provide the essential services of gas, electricity and water, but tenants are responsible for the fuel and water they use. These utility bills can be paid by the tenant, or the cost included in the rent. Care must be taken by landlords not to be left with unpaid bills.

n  Voids – Any time during which a property is not let out to tenants and not producing rental income.

n  Wealth management – A service offered by a qualified financial advisor that helps landlords look after all their personal finances, including existing income streams, assets, insurances and finances related to your property portfolio and overall tax implications.

n  X-Ray Examination – When a landlord assesses all operating costs before making a decision.

n  Yield – Yield is the rate of return on your Buy-to-Let investment and is calculated by taking the gross or net income and dividing it by the value of the property.

n  Zero mortgage balance – Investors looking to maximise income should aim to fully repay the mortgage as soon as possible to achieve maximum returns.

Having predicted growth in the market throughout 2011 and into 2012, Belvoir is expecting a major influx in landlords over coming months and looks forward to preparing them for long term investment and reward.

Welcome to the Cardiff lettings blog

Hi and welcome to the Cardiff Lettings blog.
The Cardiff Lettings Blog is brought to you by Rob Price, Owner of Belvoir Lettings Cardiff.
Belvoir is a lettings and property management agency based in Cardiff, South Wales and after months of planning and preparation I'm pleased to anounce that the Cardiff office will open in early November 2011.

Belvoir Cardiff is present across many social media sites such as Facebook, Google+ and Twitter, however this blog is intended to be a more informal outlet of information regarding Belvoir Cardiff and the Cardiff lettings market.

If you have an interest in property then I hope this blog will reveal some of the trials, tribulations and rewards concerning the lettings scene in Cardiff.

I'm passionate about Cardiff and the Cardiff property scene. If you also have an interest please feel free to contribute, leave a post, email me, call me or pop into our office to meet me in person.

Thanks,
Rob Price