Buy to Let- things to do prior to tenants arriving
Introduction- Following the purchase of an investment property, it is time to prepare the building for letting purposes. The following article outlines the various practical steps most landlords will have to go through in the preparation of their new rental property….
Decorating and Furnishing The Property it is very important to attract the right sort of tenants to maximise the rental income. For instance, most young professional couples will be looking for convenience, cleanliness and neutral colours. They will expect a high quality standard of interior decor, as well as a well-kept and well maintained exterior. Think through what you’re prospective tenant market is likely to expect, depending upon the property and the local area. Students will have lower expectations than professionals, families more space orientated different needs than single people. Most landlords tend to choose neutral colours which are cheap and easy to obtain, such as magnolia. This ensures that after a few years, when the property needs redecorating, the colour is easily re obtainable. Most ‘hint of something rather’ colours tend to be rebranded after a few years by paint manufacturers for obvious reasons. Never try to decorate a property base don your own tastes, instead keep the average needs of your target market in mind. Neutral and clean colours throughout the property likely to attract prospective tenants during the viewing process. Freshly painted walls will impress prospective viewers and a more likely to help you achieve your higher desired rental income.
If you are planning to let the property furnished, you will need to ensure any furniture meets fire safety regulations. Most tenants would expect white goods to be provided as very few would take their own white goods around with them between rental properties over time. Furnishing an entire property can be a daunting exercise and it is sensible to make a shopping list up beforehand, to save time and money.
If the property is quite small, don’t over clutter with unnecessary furniture and be prepared for tenant requests to move their own furniture into the property if appropriate. The most important rooms to ensure are prepared properly the kitchen and the bathroom. Here the fittings and fixtures must be of good quality and durable in nature. Most tenants would expect a power shower and dishwasher.
Tenants will not treat the property with the same love and respect that you would do, were at your own home. In other words, there will be some wear and tear on the interior decoration and internal fixtures of the property. There may also be the odd minor breakage or accidents where something gets spilt on your carpets. Here wipe clean paint and carpets that have been treated with anti spill carpet protector, provide practical solutions. Some of the largest furniture costs will be in the purchase of beds and lounge sofa suites. Here going for the cheapest budget alternative may be a false economy. Budget for durability if you are planning a long-term let and would like to not replace large expense items in a few years time.
Project plan for the delivery lead times enforced by most bathroom and kitchen retailers and Manufacturer’s. This means shopping for the larger items that need to be delivered at the beginning of the preparation process. The average lead time for a new kitchen is around one month if being delivered from a retailer’s warehouse. Some of the larger DIY stores have got bad reputations for making delivery mistakes, such as sending the wrong kitchen unit, the wrong quantity or not delivering it at all. Plan some contingency time for these annoying and time wasting type scenarios.
General Appearance of the Property once the property has been fully furnished and decorated, it must also appear to have been tidied and organised, to provide a welcoming new home your new tenant. Try and prepare the property to a high quality standards so that your tenant feels welcome and is more likely to maintain that level of cleanliness and tidiness, throughout the life of the tenancy. Cleanliness is very important for tenants who will expect the property to have been cleaned from top to bottom before they enter the property. Some local cleaning firms may provide a blitz type service which includes a deep clean and a clean of the kitchen and it’s appliances, such as the cooker and fridge.
Creating a good first impression is also an important aspect of creating goodwill with your new tenants. Therefore, why not leave them a note welcoming to their property, a bottle of wine or some flowers. Tidy away any junk mail that may be left on the previous couple of days before the Tenants were due to enter the property. This also removes the impression of poor organisation. Always leave some new bottles of cleaning materials under the sink or under the stairs. This could include a bottle of bleach, stain removal, washing-up powder, washing-up liquid and jay clothes. For the minimal expense it makes the Tenants life easier if they can start as they mean to go on.
You should also ensure that the property has security and is aware of how to works. This includes checking that the burglar alarm is working, as well as providing a decent window and doors, including providing additional sets of keys. This provides reassurance to tenants who will be unfamiliar with the workings of the property during the first day or two, and high profile targets for local burglars.
Setting The Rental Value it is likely that if you’re using a local letting agent, they will have a better idea of the most appropriate rental value of the property could achieve on the open market. Clearly you want to maximise your rental return, but void unnecessary void periods due to overpricing the property between tenancies. It is sensible to always require the rents to be paid upfront and it is usual to ask for one month in advance. Compare your property with similar rental properties to double check with the letting agents recommendations. It is possible to buy rent guarantee insurance from your buy to let insurance provider. This provides you with some added comforts that your investment is protected and that you will be able to afford the monthly mortgage payments in the event of a void period.
The final rental figure you market the property act will depend very much on the quality of your investment property, in terms of it’s size, quality and location. Most tenants are seeking convenience in terms of the home creature comforts, access to transport links to commute to their jobs as well as closeness to local shops, pubs and night life. Make sure that whatever rental figure you decide, is probably outlined in your assured short alternative agreement and that you build in scope for potential rent increases, according to statutory constraints.
Planning to Avoid Rental Voids sometimes it is better to accept a lower rent, then put up with longer void periods where you receive no rent. The balance between overpricing and maximising your rental return should be carefully thought through, and may depend upon your mortgage arrangements with your provider, as well as your investment plans in the future. Landlords are largely at the mercy of the local market and cannot be expected to substantially overpricing individual property, where there is plenty of other properties nearby which tends to choose from. The greedy landlord never wins. Huge increase in rental demand, since the onset of the credit crunch has meant that equity in levels properties has collapsed, demand for property has risen and landlords are struggling to remortgage their existing packages with their current lenders. In addition, re-advertising the property to new tenants will also cost money at the end of each reference period. It is much cheaper in the long run to keep the same tenants as a lower rental rates, who are more satisfied that are not feel compelled to seek cheaper accommodation elsewhere.
Obtain Relevant Letting Insurances & Income Protection another important aspect of preparing the rental property is ensuring that you have the adequate insurance is in place before the let starts. This should include adequate buildings and contents insurance, which will be a precondition of your part of the mortgage offer anyway. You may choose to ensure a certain proportion of the contents of the property, such as the larger white goods and sofas. Tenants will be expected to purchase their own rental insurance regardless. The buildings policies aims to cover the loss or damage caused by burst pipes, fire, storms or floods malicious damage and subsidence and other risk areas, commonly identified in most building insurance policies. Check the policy wording carefully to identify exclusion such as tenants on housing benefit.
Sign Agreement with a Letting Agent your perspective as the agent will provide you with a contract and expect you to sign it, continued to a minimum six monthly term. This letting management contract, outlines their roles and responsibilities as well as your commitment to pay them their management fee over the period. check the wording carefully to ensure you understand the termination scenarios in the events you are unhappy with the quality of their service, or decide to sell the property in the future. Most letting agents will either offer you a finder’s fee deal or alternatively a full management service. The latter involves providing a complete service, which will free up your time as a landlord to concentrate on other things. The services include marketing your property in local newspapers and on the Internet, arranging viewings, drafting the short-term tenancy agreement, inspecting the property on rate basis, arranging the inventory check-in, handover of keys and ongoing problem solving.
Self-Managed Let if you are planning to manage the let yourself, you’ll need to go to a number of activities in preparation for new tenants. The decision as to whether or not you employ a letting agent will depend upon your perception of the value they provide, relative to their cost, and how much free time you have available to deal with the services they would normally provide. In particular, the ability to attract new tenants in future through established marketing channels is one of the biggest ranks of local letting agents. The main areas of self manage letting as follow:-
- Show Prospective Tenants Around The Property think about personal safety before showing anybody around your new investment property on your own.Always tell someone else where you are going and what you are doing, and who you meeting.
- Collecting Holding Deposit if a prospective tenant wants to secure the property, and you’re happy with, you’ll need to ask them for a non-refundable holding deposit. This is normally deducted from their initial rent and will be a nominal fee of around £100. This sorts at the time wasters from the tenants who are very serious and want to Keep the property off the market fresh all the time, prior to the tenant referencing process to be undertaken.
- Credit Checks you will need to check the credit worthiness of your prospective tenants to ensure they are capable of meeting the committee’s rental payments over the fixed term. This will involve doing credit checks using one of the major credit checking organisations. To obtain a reference in the first place, you will need their written permission and some basic details in order to carry out the checks. The basic information will be their full name and date of birth, current address in previous address, employers address (employment reference), details of emergency contact telephone numbers, banking details. You will need to handle this information with great respect and care and explain exactly what you plan to do to obtain a credit check.
- Obtaining Tenants References you will need to investigate the background of your prospective tenant to see that they are the right type of person and are likely to look after your property carefully, pay rent in full and on time and leave the property at the end of the tenancy. This will involve carrying out an employer’s reference check, past employers reference check and financial credit reference check. For younger student tenants this May involve them nominating a guarantor and providing a character reference from a family friend.
- Collecting Rental Deposits tenants will be expected to deposit a large proportion of rent up front to secure the property and act as a ‘Bond’, in case there are any potential damage is caused by the tenants during the lifetime of the tenancy. The tenancy deposit scheme provides an ideal platform to ensure impartiality.
- Signing of the Tenancy Agreement tenants must sign a tenancy agreement before entering the property to ensure it is legal process. The Assured Short-hold Tenancy agreement is the most common type of letting contracts in the United Kingdom. The document will outline the rights and responsibilities of both the landlord and tenant and outline in practical terms what is expected from both parties.
- strong>Help Tenants Contact Utility Companies try and make your tenants lives easier by providing the contact details of the local utility companies, connected to the property. By doing this you are ensuring that utility companies chase tenants for outstanding bills and not you as the property owner.
- Inventory Check In a proper at check-in process must be undertaken, outlining all items within the property, their quality, location so that a record of the contents can be taken at the beginning of tenancy and compared with that at the end. Any breakages or damages may mean that an element of the rental deposits is used to repay the landlord accordingly.
- Welcome and Hand Over Keys make sure the keys to the property work properly and that the tenant has more than one set of keys and can operate them effectively. Old stiff door locks may present problems for some tenants, as well as burglar alarms where they do not know the full digit security code.
Assetsure provides UK landlord buy to let insurance for buildings and contents for private landlords, letting agents and property management companies in the United Kingdom.