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Choosing a Rental Property

Successful property investment is dependent on choosing the right property in the right location. You also need to finance the purchase in a way which will maximise the return on your investment. The property must be prepared so that it attracts a large range of reliable tenants. Buying a rental property is very different from finding a home for yourself. Remember, this is a business investment, so be objective and focus on who is likely to rent the property you are considering buying.A good rental property should have:

A good rental property should have:

Before you buy a property always speak to us first as we :

Studio flats

This is the cheapest accommodation available from letting agents. They generally attract more transient tenants such as newly divorced, low earners and people working in the area on short-term contracts.Demand for studios is always good, but bear in mind changeover of tenants is more frequent as studios are generally a temporary solution for the tenant.

Retirement flats

These flats are considerably cheaper to buy, but they often have very high service charges as wardens are usually employed to look after the residents. Some blocks do not allow sub-letting. Demand is very limited as they have strict age limits and most people by the age of 65 have generally found a permanent home.

One bedroom flats

These are highly sought after by single people and young couples who prefer the flexibility of renting, or are unable to secure a mortgage. The rental yield is generally higher than other types of property but beware of buying in a block of flats which have higher service charges. These are generally blocks where there are lifts, landscaped gardens and high maintenance exteriors such as flat roofs and rendering. However, these flats may attract a higher rent which may offset the higher service charge. Always ask for details of the service charges before considering making an offer. The service charge is the annual fee charged by the managing agents to maintain the block.

Two bedroom flats

This type of property attracts singles, couples, sharers, and single parents. Flats with gardens or outside spaces are particularly sought after. Single parents are often entitled to full or part-housing benefit. We always take a guarantor for any tenant on housing benefit (usually a parent) who is then responsible for any unpaid rent and any damages not covered by the deposit.

Three bedroom flats/maisonettes

These are often found in town centres and are generally older properties that have been converted into flats, sometimes above shops. They can be more difficult to let as families normally prefer to have a house with a garden and if you let the property to sharers they are more transient and can be more problematic. However, they can be very cheap to buy, especially if they are over a shop, although not all banks offer finance on properties above commercial properties. When letting to sharers the property will be classified as a smaller House in Multiple Occupation (HMO). A smaller HMO is any building of more than two stories but with less than five residents, eg. a couple (married or not) sharing a flat with one friend. Councils have the choice whether to elect for smaller HMO’s to have to be licensed, currently some councils have elected to license certain areas within cities. If the property does need licensing then the Landlord would need to apply to the council for permission and ensure the property meets the criteria for fire safety precautions. If the property does not need to be licensed then the property would still need to meet a prescribed standard and have basic fire safety precaution of which the council would advise.

Two or three bedroom houses/bungalows

These are very popular with small families and single parents, especially if they are near to a school. Professional couples often prefer these to flats as they are generally located in quieter areas. Houses and bungalows are nearly always freehold properties, which means there is no annual service charge to pay.

Large family houses

Higher value houses are not normally bought for buy to let as the rental yield is considerably lower. Most of our family house stock comes from families who have relocated or houses bequeathed to relatives. Demand is always high as there is a shortage of family houses available. Try to avoid buying a property with a large garden, or consider including the cost of the gardening within the rent – tenants rarely have the time or experience to maintain a large landscaped garden.

Houses in Multiple Occupation (HMOs)

Unlike a small HMO, when a property has three or more stories and is let to five or more tenants then the property has to be licensed by the local authority.

The following types of accommodation are all likely to be HMOs:

Although they are more profitable, they do require more time and effort to manage. Furthermore the initial investment is high, as they have to meet stringent health and safety regulations, which may include fire doors, fire alarm systems, upgrading of ceilings and floor, minimum room sizes etc.

Your property management costs will also be considerably higher because tenant turnover tends to be greater and the residential use is more intensive (more tenants using the same kitchen and bathroom).

Freehold Or Leasehold?

Most flats in this country are leasehold properties, while most houses are freehold properties. There are some freehold flats available but these are more difficult to obtain mortgages on. Although leaseholders pay annual service charges which are usually more than you would spend maintaining a freehold property, the return from a flat is generally still higher. Also, if you are thinking of or are living abroad at least you don’t have to worry if a storm blows the roof off your property, as it will all be nicely sorted out for you!

Mortgage companies do not generally lend on any properties with less than 70 years left on the lease. Before making an offer on a leasehold property you will need to ask the vendor for:

Leasehold properties with short leases are generally marketed at a low price to reflect the cost of extending the lease. A buyer would need to buy the property for cash and then extend the lease at a later date. A leaseholder generally has the right to extend the lease by 90 years or even to buy the freehold if certain criteria are met. You can contact the Leasehold Enfranchisement Advisory Service for more information.

Also some flat leases require you to inform the freeholder of your plans to let the property, or may prohibit certain types of lettings. Check your lease agreement carefully for any possible restrictions.

Average service charges are between £600 and £1000 and cover the fees for the managing agent or freeholder maintaining the communal areas, collecting the ground rent (generally a nominal small amount) and the buildings insurance. If the block requires future works, eg a new roof or rendering, you will also need to find out whether there is a reserve fund to pay for this or whether the managing

Furnished Or Unfurnished?

There is very little demand in our area for furnished properties so we always recommend that properties are offered as unfurnished, unless circumstances dictate otherwise, eg if you are letting your own home whilst abroad or on a short-term work contract elsewhere. Curtains or blinds can be left as tenants can easily store curtains should they wish to provide their own. White goods such as cookers are generally provided in unfurnished properties as kitchens are often fully integrated. The landlord will be liable for the cost of repairs to any appliances supplied with the property, unless agreed otherwise.

Searching For Properties

Rightmove is a great place to search for buy to let properties, as most agents advertise their properties with them you just need access to the internet. You can compare properties with other similar ones for sale. Bear in mind that some properties may be advertised for sale at a higher price than they will fetch, particularly if the vendor is in negative equity. Rightmove also has the facility to look up sold prices in the area, this will greatly help you value the property.

Call us! In addition to the extensive range of properties we have for sale, we often have landlords wishing to sell some of their properties. We can also contact our landlords to see if any will consider selling a property. Often they will already be tenanted so rent monies will come in straight away!

Auctions are another alternative for purchasing a rental property. Auction houses that cover East Sussex includes; Clive Emson and Fox and Sons.

Be very careful when buying from an auction; although you may get a bargain such as a repossession, some properties that end up in the auction have serious problems, including subsidence, lease problems, damp, extensive repairs required etc. You should get a full structural survey and make extensive pre-purchase enquiries before the auction.

Auctions are generally more suitable for cash purchasers as a 10% deposit is required when the hammer goes down and the balance needs to be paid within 20 working days. It would be very difficult to

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