Buy to Let - What to consider?
Discussion
rufusgti said:
When I say self management WILL save you money, I'm referring mainly to the option of selecting your own tenants - as opposed to the agency finding the first group of lads who managed to pool a deposit together. The real savings are in not having voids.
What do you think?
Hmmm. If you were our client you could be offered the option to 'sit-in' at the viewings, or be given a close and detailed breakdown of all the prospects and the choice amongst them, and certainly one way or another encouraged to become as involved as you wished (or didn't wish) in the tenant selection process. I think you'd find it interesting, including how we go about finding and then selecting a tenant, but I think it would end up with you leaving it to us. We're quite capable of being the monkey to the organ-grinder owner, but it's rare for us to learn anything new about either letting or property management from an owner. What do you think?
These days with so many new entrants to the business of letting agency/property management it's a competitive field. Poor performance is one of the easiest ways to lose business. Agents will therefore do their utmost to manage property satisfactorily. This isn't to say things won't ever go wrong. They can and will. But a sensible agent is mindful that they're the ones who'll be left with the cost and hassle of sorting the mess out, so avoiding getting into a mess in the first place is a good way to avoid having to deal with the consequences.
The thing is there really are a lot of inexperienced agents now, including estate agents who have turned to letting for survival. Some of them - indeed many of them - are pretty adept at marketing, but not as good at actually doing the business. They also tend to end up with a client list - however large - of inexperienced owners. And the combination - especially when things go wrong - can be pretty volatile!
Most of our new business now isn't from referral, it's from (fairly angry) people who've had dissatisfactory experiences. On almost every occasion the (sometimes laughable) nightmares are rooted in inexperience, although I must say totally unrealistic expectations on the part of owners aren't entirely unknown either.
In my experience there seems to be enough tenants to go round (West London) but maybe not the quality.
I always use agents on a finders fee basis and this has been working for me. I have 3 I use at a cost of 5%. Do research your agent though as there dont seem to be many average ones. Go with someone who has been at it a while as they will care about your repeat business.
Not a bad idea to meet your prospective tenants and go through the references with them.
Just my 2 bobs worth.
Oh and check the properties regularily as a tenant wont always tell you there is a water leak until the floor falls through.
I always use agents on a finders fee basis and this has been working for me. I have 3 I use at a cost of 5%. Do research your agent though as there dont seem to be many average ones. Go with someone who has been at it a while as they will care about your repeat business.
Not a bad idea to meet your prospective tenants and go through the references with them.
Just my 2 bobs worth.
Oh and check the properties regularily as a tenant wont always tell you there is a water leak until the floor falls through.
It's interesting that BigDog 'contracts out' the thing that Rufus is keenest to self-manage (tenant finding).
As regards water leaks, you may find the tenant isn't aware of the leak because the leak is from the flat's pipework, and the pipework's mostly under the floorboards!
Lost count of the number of people whose door you knock to tell them they're leaking into your flat only to get the response "can't see anything leaking in here". Always think it's a shame when they've got tiled k or b floors.....
As regards water leaks, you may find the tenant isn't aware of the leak because the leak is from the flat's pipework, and the pipework's mostly under the floorboards!
Lost count of the number of people whose door you knock to tell them they're leaking into your flat only to get the response "can't see anything leaking in here". Always think it's a shame when they've got tiled k or b floors.....
I think it depends what sort of person you are. I've done my first viewing today and it was pretty comfortable for me. I deal with people and houses all day at work so it's pretty natural.
Prospective tenants wanting to get out of some damp ridden hole that the landlord won't fix....
Prospective tenants wanting to get out of some damp ridden hole that the landlord won't fix....
groak said:
It's interesting that BigDog 'contracts out' the thing that Rufus is keenest to self-manage (tenant finding).
To be fair. You sound like a very reputable agent with the buisness sense to look to the future. If there were such agents in my area I would consider handing over responsibility. Unfortunately I am blessed with the choice of out right criminals, or greedy, bolshy idiots. Neither take my fancy. Certainly Not living the dream. The days of BTL dreams are over for now. I'm sure they will return but have no idea when or how bad things will get before then.
In fairness to my tenant, she did call me to tell me there were mushrooms growing on the wall. This is newly built 4 years ago. English isn't her first language bless.
Regarding using a reputable agent to find your tenants:
The third time you pick up a gumtree punter from the station on a rainy sunday afternoon to find out this is just the flat for him and that he feels the £750 is a fair rent and he would like to rent it when he gets a job you are likely to see 5% as a bargain.
If a dubious couple pull the "I have lost my job and my partners left me. You will have to call the DSS for your rent" you are going to have a real challenge getting her/him child? out. If they then register as having a mental disorder they could be there forever.
Collecting your DD and dealing with a quality tenant is easy. Finding that quality tenant requires more than an ad on Loot or the like. The good agents have a bit of a nose for it.
Different if you are near a UNI of course as you can often deal direct. Be aware though if you have students or DSS tenants that your insurance may be trickier/dearer.
Regarding using a reputable agent to find your tenants:
The third time you pick up a gumtree punter from the station on a rainy sunday afternoon to find out this is just the flat for him and that he feels the £750 is a fair rent and he would like to rent it when he gets a job you are likely to see 5% as a bargain.
If a dubious couple pull the "I have lost my job and my partners left me. You will have to call the DSS for your rent" you are going to have a real challenge getting her/him child? out. If they then register as having a mental disorder they could be there forever.
Collecting your DD and dealing with a quality tenant is easy. Finding that quality tenant requires more than an ad on Loot or the like. The good agents have a bit of a nose for it.
Different if you are near a UNI of course as you can often deal direct. Be aware though if you have students or DSS tenants that your insurance may be trickier/dearer.
jamescodriver said:
Mr POD said:
okay, I've been carrying out some serious research.
stuff
The property next door was sold in 2009 having been on the market for 560 days (13/12/2007 - 24/06/09)...It was three flats, there was a condition on it though that it had to be turned back to a single dwelling...It was marketed at £170kstuff
Drove past it today. 100's of houses GONE !!!
Well when I first posted on here in May seems a long time ago! So get so good. Just had confirmation from our tenants that they are staying on. Issues wise we have had a blocked drain straight away after they moved in which was easily sorted. We had a break in too which was a bit of a drama they stole the tenants keys and one of their cars. Keys left on show in the kitchen sadly. Sorted for under £200 but was a bit of a stress at the time.
We were still on the lookout for a second property but can't seem to find anything suitable. The places that need some work doing are all to expensive for what they are and people are wanting too much for everything else. Nothing as good (in our eyes) as our first purchase has come on the market locally so far.....
We were still on the lookout for a second property but can't seem to find anything suitable. The places that need some work doing are all to expensive for what they are and people are wanting too much for everything else. Nothing as good (in our eyes) as our first purchase has come on the market locally so far.....
I haven't done any UK BTL since 2008 but I am being seriously tempted back in right now by a friend who owns a lettings business and has access to a number of distressed sales.
A few miles up the road in the Welsh valleys are a couple of rental areas that get tenants very quickly. Houses that would be up for around £70K are up selling for quick cash for around £40K. To service the loan, insurance, etc it's only about £250 per month yet they rent out at £450 per month. £10K deposit gets you one on a decent mortgage rate.
I think the downside would be if/when you want to sell. Unless the market changes, I don't think they will go up too much in value even at the lower price, though for an extra bit of cash each month, I'm struggling to see why not.
Anyone fancy knocking some sense into me?
A few miles up the road in the Welsh valleys are a couple of rental areas that get tenants very quickly. Houses that would be up for around £70K are up selling for quick cash for around £40K. To service the loan, insurance, etc it's only about £250 per month yet they rent out at £450 per month. £10K deposit gets you one on a decent mortgage rate.
I think the downside would be if/when you want to sell. Unless the market changes, I don't think they will go up too much in value even at the lower price, though for an extra bit of cash each month, I'm struggling to see why not.
Anyone fancy knocking some sense into me?
Dick Dastardly said:
I haven't done any UK BTL since 2008 but I am being seriously tempted back in right now by a friend who owns a lettings business and has access to a number of distressed sales.
A few miles up the road in the Welsh valleys are a couple of rental areas that get tenants very quickly. Houses that would be up for around £70K are up selling for quick cash for around £40K. To service the loan, insurance, etc it's only about £250 per month yet they rent out at £450 per month. £10K deposit gets you one on a decent mortgage rate.
I think the downside would be if/when you want to sell. Unless the market changes, I don't think they will go up too much in value even at the lower price, though for an extra bit of cash each month, I'm struggling to see why not.
Anyone fancy knocking some sense into me?
Do you know what ALL your costs are going to be? Maintenance, voids, marketing, bad debt, management? £200 per month net of mortgage and insurance doesn't leave a lot to pay for any of the other costs. But let's assume you can manage all other costs for £50 per month does £1800 per annum sound like enough for running a tenanted house in a poor area?A few miles up the road in the Welsh valleys are a couple of rental areas that get tenants very quickly. Houses that would be up for around £70K are up selling for quick cash for around £40K. To service the loan, insurance, etc it's only about £250 per month yet they rent out at £450 per month. £10K deposit gets you one on a decent mortgage rate.
I think the downside would be if/when you want to sell. Unless the market changes, I don't think they will go up too much in value even at the lower price, though for an extra bit of cash each month, I'm struggling to see why not.
Anyone fancy knocking some sense into me?
As you correctly point out, you may have trouble selling should you want to. So, you might be pretty much anchored to a relatively undesirable property that earns beer money.
Lots of people make a good living off the bottom of the market, but it requires scale and experience to make viable. I have seen plenty of distressed sellers who were in fact investors unprepared for the reality of running properties like those you mention.
DD
I think it's the opportunity cost of a given area over another that needs consideration too (and maybe, unconsciously that's why you've held off from investing via your friend?). Your welsh valley, for example. Yes you're buying in 'cheap' at £40k and yes, they'll rent quickly (per your post - I don't know the specific area so I take your word for it) but over the long term - will this area give you any capital growth (that isn't eroded by inflation) over, perhaps, another area - say in Birmingham (assume your based Midlands/Manchester ish?) or Manchester?
I completely understand the rationale for buying discounted stock and the attraction of an easily let (and long term let) property. It's a no-brainer. Yet part of me feels that there might be better areas (where maybe you'll have to invest a greater amount to buy into the area) that offers very similar discounted stock and lettable property.
Plus - I do feel that there are parts of Wales (100% of it actually) where prices are artificially high, that the market has further to fall, that they will be the last area to emerge from any recession (apart from Cardiff, Swansea and isolated pockets), are susceptible to 2nd home owners that, if things go pear-shaped will sell their 2nd homes first before stocks, shares and their main homes, where jobs are scarce/or there are job losses, there's a disproportionate knock-on in recovery, where economic activity is not part of the local's make-up, that to be honest I'd run a mile no matter how cheap the stock is.
Because fundamentally - you can see those houses being worth no more than £70k in 10 years time whereas even in the grotty areas of Manchester or Birmingham you know it's only a matter of time, after inward investment, that the areas will eventually be gentrified. That economic activity will lead to a rise in value.
I just can't see the same happening in Llanberis or Capel Curig or the Llyn Peninsula. Penmaenmawr might have potential because of the A55 and Chester/Wrexham but even so - i think the market has moved there.
I think it's the opportunity cost of a given area over another that needs consideration too (and maybe, unconsciously that's why you've held off from investing via your friend?). Your welsh valley, for example. Yes you're buying in 'cheap' at £40k and yes, they'll rent quickly (per your post - I don't know the specific area so I take your word for it) but over the long term - will this area give you any capital growth (that isn't eroded by inflation) over, perhaps, another area - say in Birmingham (assume your based Midlands/Manchester ish?) or Manchester?
I completely understand the rationale for buying discounted stock and the attraction of an easily let (and long term let) property. It's a no-brainer. Yet part of me feels that there might be better areas (where maybe you'll have to invest a greater amount to buy into the area) that offers very similar discounted stock and lettable property.
Plus - I do feel that there are parts of Wales (100% of it actually) where prices are artificially high, that the market has further to fall, that they will be the last area to emerge from any recession (apart from Cardiff, Swansea and isolated pockets), are susceptible to 2nd home owners that, if things go pear-shaped will sell their 2nd homes first before stocks, shares and their main homes, where jobs are scarce/or there are job losses, there's a disproportionate knock-on in recovery, where economic activity is not part of the local's make-up, that to be honest I'd run a mile no matter how cheap the stock is.
Because fundamentally - you can see those houses being worth no more than £70k in 10 years time whereas even in the grotty areas of Manchester or Birmingham you know it's only a matter of time, after inward investment, that the areas will eventually be gentrified. That economic activity will lead to a rise in value.
I just can't see the same happening in Llanberis or Capel Curig or the Llyn Peninsula. Penmaenmawr might have potential because of the A55 and Chester/Wrexham but even so - i think the market has moved there.
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