With a rapidly growing population and strengthening demand for living space, London has seen a significant increase in Buy-to-Let investment and the private rental sector. With the volatility of the stock market, low interest rates, plus London’s international reputation as an attractive and cosmopolitan city, residential property is still regarded as a safe haven for both domestic and overseas investors.
Growth within the private rental sector (PRS) and better availability of BTL finance over recent years has propelled it into the national consciousness and proved a very popular investment option. This has not been without some controversy as buy to let landlords have been accused of pricing first time buyers out of the market by buying up stock that would ordinarily be secured by them.
Although this may have little relevance in Central London due to the starting cost per unit and where very few first time buyers purchase, this has prompted the UK government to introduce taxation specific to second home buyers and individual landlords by removing some of the tax advantages previously available to private landlords. This change started in April 2017.
The banking crisis of 2007 and mortgage lenders’ subsequent tightening of mortgage lending qualifying criteria (particularly to second homes and investment purchases) has reduced the ability of some to be able to enter the market, and this was tightened up still further in January 2017. Despite these measures, the prospect of a regular rental income coupled with reliable long term capital appreciation has ensured that Buy-to-Let remains a hugely significant component of the property market.
As with any property purchase location is the key consideration. A Buy-to-Let investment requires different considerations compared to buying a property for your own occupation, although some of the factors will definitely overlap. Primarily you need to consider your target tenant market and their requirements. Obvious considerations are proximity to public transport and place of work or study. Equally important is the prospect for future capital growth. Historically Central London as a whole has been regarded as a “safe” prospect for reliable capital growth as it is possible to identify certain hotspots or areas where gentrification is planned or taking place. This is where Hudsons can provide specialist advice on recommended locations within our areas of expertise.
This will, of course, be determined principally by your budget. However, along with location it is important to consider the profile of the tenant you are seeking to attract. For example, a student tenant may be less fussy on interior condition than a professional tenant. Also consider the maximum occupancy of the property. As a general rule the greater the occupancy the greater the rent that can be generated, however you need to be aware of each of the Borough Council’s rules on HMO's (Houses of Multiple Occupation) and Hudsons will be happy to guide you through this. Another very important consideration is the prospect for strong capital growth. Questions to discuss with your agent should include: Is the area on the up or in decline? Are there likely to be any future large maintenance bills that you might be liable for? Are there any restrictions to renting attached to the property?
This is a question we are asked by most new landlords. Generally speaking we have greater tenant demand for furnished homes as opposed to unfurnished, however this preference does vary depending on the profile of tenant and tenancy type that you are offering. Unfurnished tenants have a tendency to stay longer, so there are benefits to both. Longer term tenants, especially those of two or three year terms, normally prefer their own choice of furniture. Short term lets will invariably require a furnished property, although this method generally attracts more “wear and tear” on walls and furniture.
Along with determining the length of tenancy you are prepared to offer your property for, it is also important to consider just how personally involved you want to be with the tenancy and tenants. Some landlords are quite happy dealing with the day-to-day maintenance, however dealing with the ever changing legislation required by law (there are over 100 of these) and the practical issues that arise within their tenants’ tenancy term require a significant investment of your time.
However, for those that do not have the time or inclination, or those that lack the necessary understanding of property legislation, a fully managed service is preferable, especially as this will normally take care of all aspects of the landlords’ legal compliance. Here at Hudsons our extremely experienced property management team are ready to guide you through the whole process, ensuring that your tenancy is administered under best practise principles and is fully legally compliant. Additionally, we will provide easy to understand statements and invoices produced for tax return purposes, and monitor and chase rent payments where necessary with your rent paid straight into your account, leaving you more time to sit back and relax in the knowledge that Hudsons will take the strain.
Recent years have seen a steady stream of new legislation governing the private rental sector to ensure that landlords provide safe and fair accommodation to their tenants and there is no sign of this slowing any time soon. This has added many new and complex levels of responsibility to landlords and it is vital that you are aware of your obligations and responsibilities. The penalties for non-compliance can be severe, including in the most severe instances prison sentences, so it is essential that you fully comply with the law.
Should you have any questions regarding any aspect of Hudsons Lettings and Management Service, or the law relating to residential tenancies, then please do not hesitate to contact our office on 020 7323 2277.