How do landlords make their property portfolio into a successful business investment? An expert from Belvoir Lettings advises on how to keep costs down and rents up...
Build scale & a sustainable letting business
Investing in a large portfolio with a multiple selection of houses and flats is the key to maximising a landlords potential property profit, say industry experts.
“The main advantage of this is diversity and the spreading of the risk, coupled with the potential for greater capital gains with the correct gearing strategy,” says Rick Flay, proprietor of specialist lettings agency Belvoir Sheffield.
“If, for example, a landlord has two properties and have 100% of them empty you have no income. If you have ten properties and the same two are empty you still have income, which potentially could cover the cost of the two empty ones.”
“Financial expectations against mortgage re-payments will vary by individual circumstances but my top tips for maximising rental income are to keep the property looking as new as possible at all times and to be flexible with the amount of rent and also be flexible with particular tenant requests. For example, a landlord recently lost a good tenant as he wouldn’t supply a desk and chair which we could have got for £50.
Where do professional landlords go to get their buy-to-let insurance?
“To maximise your income, owning multiple properties also enables a landlord to cut some costs, thus keeping the return high. Potentially you can negotiate better rates with agents and contractors, plus buy any building supplies you need in bulk.”
And, of course, buying in the right location is vital to keeping profits high too. Look to invest in areas where prices are good and rental demand is strong. Good transport links and proximity to hospitals and universities are all pluses.
“In the current market I would look at two-to-three-bedroom terraces close to transport and shops,” says Rick. “There is a lot of empty stock on the market at the moment so make sure properties are in good condition in the right area so you can maximize the return.”
Consider a letting agent
But, the larger your portfolio the harder it becomes for the landlord to manage the properties yourself and the more important it becomes to use an established and well respected property management agency.
“The best way to juggle multiple properties is to use a reputable agent to manage it for you,” says Rick. “It is becoming increasingly hard for private landlords to keep up-to-date with changing legislation.
And, the more properties, the more work - for example more inspections to make sure properties are being looked after, more corgi certificates to track and keep up-to-date - the list is endless.”
A property management agency will also be able to find multiple tenants, thus reducing the risk of long ‘void’ periods for any of your properties
“Belvoir's Website gets a staggering 10 million hits per month which generates huge enquiries,” says Rick. “We also man an extensive database of potential tenants, as well as using press adverts and signboards.”
But, of course, even with good advertising or a management agency finding tenants for you, the better presented properties - with the most accommodating landlords - are most likely to seal the deal.
“Presentation is critical at the moment,” says Rick. “Freshly painted, good furniture, modern and clean kitchens and bathrooms are vital.
“But, it is important to have realistic rental expectations, ” he concludes. “For example, it is better to rent today for £25 per month less than you ideally want rather than leave a property empty. For most people, at the moment, cashflow is more important than growth.”
Meet the investors…
Investors Sue Burnett-Frank and business partner Devan Patel decided to invest in multiple properties. Sue explains why…
“Since April 2007 my business partner, Devan, and I have bought three investment properties in Strood and plan to buy a further six flats over the next 12 months.
“We decided to become investors with multiple buy-to-let properties to spread out our overall investment. How long we keep each property before selling it on very much depends on market trends but we’ll definitely keep hold of each one for at least five years.
“Buying multiple smaller and cheaper investment properties rather than one or two large properties made financial sense. Two bed-roomed properties have the broadest middle market appeal thus reducing the potential for ‘void’ periods. And, even if one was left empty for a couple of months our loss would be considerably smaller than on a large property.
“Owning multiple buy-to-let properties can also help cut overall costs. For example, I have the one accountant and the rate is more cost efficient for multiples. We’ve found that the larger the portfolio the better deals can be brokered generally.
“Choosing where to buy is extremely important. We chose our area on development potential and cost – they needed to be in a manageable price range for us and provide a rental that stacked up and covered our costs.
“We asked Belvoir Lettings to manage our buy-to-let portfolio after they were recommended to us – and I can honestly say this was one of the best recommendations given to us since we started investing in buy-to-lets.
“Belvoir fully reference prospective tenants and professionally manage the tenancies ensuring they proceed smoothly with minimum fuss. They even came along to viewings and advised which properties would offer the best rental investment.
“As a consequence all three properties were rented within 10 days of completion! Giving us just enough time to decorate and deal with any other issues required.
“Juggling multiple investment properties is no problem at all. Belvoir can source contractors for us at a moments notice and we have good insurance cover for gas, electricity and mains.
“In fact, once we’ve purchased and decorated a property we simply walk away and leave it to Belvoir.”
Small changes can make a big difference
Increase the amount of rental you can ask without eating into your profit…
• Make sure that the investment property is clean and well decorated in light neutral colours to make it feel fresh and to create a sense of space.
• Add mirrors to hallways or small areas and position where they reflect light, creating the impression of an area being brighter and larger than it actually is.
• Add good window coverings and neutral, but inexpensive, artwork in each bedroom and in the main living areas.
• Make sure that the buy-to-let property smells clean and fresh.
• Create an impression of caring for the investment property - presentation makes a big difference in whether your property or someone elses is rented.
• Add new floor coverings but keep it cheap and neutral – don’t spend more than the cost of one month’s repayment.
• If you can afford to, update and replace the bathroom. If not, add modern accessories and clean thoroughly, as well as re-grouting the tiles
• Make sure that the entrance to the buy-to-let property and the hallway are well presented - its the first place a prospective tenant sees and is the last image they take away with them.
FINAL TIPS for success
Maximise your profit…
• Be sure of your market - make sure that there is a high rental demand in the area where you plan to purchase. If the market is already flooded with vacant rentals walk away.
Maximise your profit…
• Build a good relationship with local estate agents to be among the first to view their best properties in your price range - always be prepared to view potential rental properties at the very earliest opportunity.
Maximise your profit…
• Find yourself a very good letting agent who’ll do all the hard work for you.
This article has been kindly supplied by Belvoir Lettings.