A guide to property investment part 4: Buying a rental investment
So far in this series we’ve looked at why you’re considering becoming a landlord, key things to think about before becoming a landlord, and what type of property to choose. In part four, we’re getting into the real nitty-gritty of property hunting, and how to evaluate your potential rental investment.
Rental Investment – EPC Rating
EPC stands for Energy Performance Certificate, and by law all domestic or commercial buildings available for sale or to let in the UK have to have one. Current proposals look to ensure that all new tenancies will have an EPC rating of no less than a C by 2025, and existing tenancies will follow suit by 2028.
From your perspective as a potential landlord, you need to consider what works (if any) the property you’re considering will require to bring it up to a C rating, and any costs associated with that work. You don’t want to be taken by surprise in a couple of years if a huge chunk of money is needed to bring your property up to standard.
From the outside
First and foremost, make sure the front of the property looks nice from the outside. You might not be buying the property to live in yourself, but you do want to attract good tenants who will look after it, and it’s also important to do a spot of future planning when you’ll be looking to sell. A good looking property will affect the capital asset value as well as inspiring initial buyer attraction
Take note of where the bins are stored. This might seem minor, but we’ve seen properties before now where the bins have been left in the road or just fallen over and left. That’s not likely to create a great first impression for anyone.
You should also note how close the property is to a main road, and whether or not this creates a lot of noise – this could put future tenants off living in a property if they’re looking for a home they can relax in.
When you visit the property, take note as to whether there are any big trees obstructing the light – either in the garden, or the light to the property. If there are and they’re within your boundary, would you be able to remove them or are they subject to a preservation order, or other local restrictions?
What do their gardens look like? Can you get a sneaky look at their curtains or blinds to give you an idea of what sort of condition the properties are in? If the neighbours’ houses are poorly maintained, it could be an indication that you’re buying into the risk of inconsiderate neighbours, or property owned by landlords who don’t care about the condition of their property. In the long run, this could put off tenants as well as decreasing the value of your investment.
If you’re unfamiliar with an area, it’s always a good idea to pop and see what the parking is like at the weekends or in the evenings when most people are at home. For most tenants, having somewhere they can easily park their car without facing a regular battle to find a space when returning from a long day at work is very important.
The last thing you want as a landlord, is to be dealing with parking disputes between neighbouring properties and your tenants. Not only is it an unpleasant drain on your time, it could again affect how long your tenants want to remain in the property and cost you more in the long run on replacing them.
Through the keyhole
Rental Investment – First impressions
When you walk in, what does it feel like? If it feels a bit ‘off’ for some reason, is that something that can be fixed with a fresh lick of paint and some new carpets?
Are the rooms nice and bright and airy? Since the first lockdown, tenants have been looking for properties with more space, and maximising natural light is one way to accentuate how spacious and appealing a property is.
In the kitchen
Check that all the drawers in the kitchen open smoothly and none are falling off of their runners. You definitely don’t want to be paying out for a new kitchen that you haven’t bargained for!
If white goods are offered, depending on their age we would generally advise turning them down, or you could be buying a heap of problems which will cost you to have fixed, or replaced and taken away.
If integrated appliances are included, check what they’re like inside. Take a peek in the washing machine drawer, check the tumble dryer filter and have a look at the hob extractor filter and lighting unit – you want to reduce the likelihood of any nasty surprises occurring.
Is there good storage throughout the property? It’s especially important to consider the kind of bulky items people aren’t going to want on show in their home, like ironing boards and vacuum cleaners.
Check any double glazing for blown panes. You’ll either see condensation, or marks left by dried out condensation between the two pieces of glass in a double glazed window. Check for other signs of condensation on, around, or under window sills, as well as the corners of bedrooms and bathrooms.
TOP TIP: look at the condition of the mastic in the bathrooms. If there are any signs of wear, take a look at the ceiling of the room below and check there are no signs of water leaking through.
Also test the water pressure in the bath or shower. No tenant is going to want a weak shower. If the pressure is poor, you’ll be getting a phone call shortly after they’ve moved in asking you to fix it.
Walk on any upstairs floorboards to check you don’t have any that are loose-fitting.
Is there a working chimney? If so, you need to make sure the tenants are aware of which bits of upkeep they are responsible for if they’re going to use the open fire.
What sort of boiler does it have and how old is it? If the boiler’s 25 years old, you know you need to make sure there’s enough money in the pot to cover a swift replacement if it gives up the ghost.
This is quite a scary sounding list, we know. It doesn’t mean you shouldn’t purchase a property that has any of these faults though, it just means you’ll be very aware of what you’re buying and how much you’ll need to spend to bring it up to an adequate standard when buying a rental investment.
This list forms part of the due diligence we carry out when helping identify investment opportunities for landlords who live outside the area. Do you need help finding your next Cambridgeshire investment property? Get in touch, we’d love to help you.