4 steps to maximising your return on property investments
Well, you might think “that’s easy”. “Surely, I buy a good home, get a good tenant and regularly increase the rent in line with inflation”.
The reality is very different: I have been running a lettings and property management company for 16 years and I have been a landlord for a lot longer, and it has taught me one to two things which I would like to share with you.
There are so many ways to get the most from your investments, but for this article, I have drilled it down to what I think are the 4 most important steps to follow:
1. Find the Right Tenant
An obvious starting point, but one that I have seen missed quite a few times when we have been asked to pick up the pieces.
To find the right tenant you must have the right property at the right price. It’s all about how you market the product you have.
The right tenant for you will be discerning:
- To get their attention you will need to have great property photographs that make you stand out from the crowd.
- You will need to have a floorplan to show the layout of the property.
- Make sure that the property description really highlights the features and benefits of the property and its amenities.
- Go that extra mile, film a virtual tour so that the viewers can “walk around the property” from the comfort of their home.
At Maxine Lester Lettings, we will also carry out “live viewings” on our Facebook and Instagram social media channels, which have become very popular due to Covid restrictions. The main benefit of these live viewings is that it saves your tenant time, reduces the time it takes to find a new home and keeps viewers and our staff or the property occupiers much safer than having lots of people trooping through the property. Of course, there is also a benefit to the landlord, by building up an engaged audience to watch a live viewing, the property will always rent quicker, thereby reducing the void time before or between tenancies.
Once you have found your tenant you need to make sure they are not a ‘professionally bad tenant’.
What do I mean by that? Well, over the last few years my team have found a number of individuals who feel it’s OK to cheat the system. That could mean they are happy to provide you with false documentation, forgetting to advise that they have a £50,000 CCJ, or making up who their employer is or falsifying company information.
Believe me, they are out there! The good thing is that they are few in number, but it will cost you dearly if you skip any of the procedures at the outset of the relationship, which will take your future tenant through a rigorous referencing procedure. Remember, once you have a contract (Assured Shorthold Tenancy or Non-Housing Act Tenancy / Company Let) you will have to adhere to that contract regardless of what is happening with the rent or the property.
2. Buy the right property
It’s no good hoping that your ‘1 bed furnished studio apartment’ in a rundown block of flats will attract professional tenants (doctors, solicitors, lecturers etc). Truly, I had a conversation with a landlord a few years ago:- They really thought that they had purchased well, expecting the rental to be a lot higher as they knew what a doctor friend paid in rent. No idea of the type of property that the doctor rented, just the amount paid in rent!
We did find them a tenant, but it was at a 30% lower rental than his expectations. To put it simply, if you want a family in your property (which usually means a longer let) makes ensure that your property is near schools, shops and public transport, and has the right type of internal and external space suitable for a family.
If you want to rent to a young upwardly mobile individual, you are going to have to ensure there is excellent broadband and that the property is near to coffee shops and restaurants. When you are starting your investment journey, make sure you buy the correct property for the tenant that you want. We do come across many ‘accidental landlords’ (those who have not purchased initially to rent the property, but circumstances mean they have to rent it) so at Maxine Lester, the team can all advise on the type of person your property will attract.
Then it comes down to interior decoration. When you are redecorating a property it’s always best to look at how new builds are being marketed. The large building companies spend a fortune on what colours attract people, and what the best fixtures and fittings currently are, so why not just take the lead from them? As I write this, we are trying to help a landlord who is redecorating a property, and we are advising that ‘magnolia’ is not the colour that the tenants of today are looking for!
3. Have the right back up
Depending upon the size of your portfolio and how much time you want to spend on it will dictate what help you are going to need.
Most agents have a menu of 3 offerings:
- Find a tenant / let only
- Rent collection
- Full management
Many large portfolio landlords will have contractors that they trust and can rely upon to get the job done well and in a timely manner. It is possible for your managing agent to utilise these contractors, provided that all of their insurance & qualification documentation is in order. However, it is good to know that they have the back-up of the managing agent’s contractors. Quite often we can advise on the quality of the work & the cost of the jobs, making sure that the landlord is never out of pocket and that the work is of the best standard possible.
Then there is the legal side of lettings! There are 179 pieces of legislation that affect the Private Rental Sector.
With the joy of regular changes keeping us all on our toes, all of which will have a penalty attached to them if you get it wrong, in the form of a fine or custodial sentence. If you are considering using a letting agent to manage your portfolio for you, make sure that they understand all of the legislation and are completely up to date with everything as it happens and is prepared for on-coming changes.
Not all agents are the same and if you base your choice on price alone it’s no different than choosing the cheapest bottle of wine and hoping for a good drink – you might be
Another little test you could perform to test your agent is to phone or email them ‘as a tenant’ to make sure that they will look after your tenant as much as they look after you, remember they will be the interface between you both throughout the tenancy, and it is imperative for this relationship to be fair and harmonious for everyone from the outset.
4. Treat your tenant as you would want to be treated
Your tenant is your customer, and it should be a mutually beneficial arrangement. Renting has become a flexible way to have a home when the deposit to buy a home is out of reach. There are many reasons that people will rent a home:
- Job flexibility
- Working away from home
- Expanding family
- Testing the area before buying
If that was your home, even if it was for 6 months, you would want to know that the property was safe and warm, and you would want to know that if something like the heating wasn’t working, that it would be sorted.
Many tenancies go bad when the landlord will not carry out basic maintenance or is slow carrying things out. If you want to make sure that your tenants do not start to look for other options, then make sure that requests are dealt with speedily. I am not suggesting that a request for a total redecoration is carried out at the drop of a hat, if your tenant does ask for this, it’s the beginning of a negotiation which could mean a rent increase.
If you would like to talk about anything in this article, I would be delighted to talk to you.