Property Investments

What are the returns from letting property?

Gross returns - the rent received before taking account of the cost of letting - such as management fees, maintenance, service charges ground rents and insurance varies between 7% and 20%. This can be less for very expensive properties, and more for cheap properties.

The average rental return in Britain today hovers around the 10% mark, and capital appreciation is likely to match, if not exceed, inflation for the foreseeable future.

As a rule of thumb, the gross rents should be between 130% and 150% of the monthly mortgage payments.

What difference does Letting a property with Codys Estate Agents & Lettings make?

Codys know the local market, whether there is a demand for say, two-bedroomed flats, or four bedroomed houses, or for properties close to schools or transport links or secluded properties with gardens. Also Codys know the standard of decoration, furnishing, fixtures and fittings required.

Then there is the selection of well-covenanted tenants who will pay their rent on time and leave the property on time and in a proper state; and there is the management of the tenancy.

Knowing that the management of any inherent risk is in the hands of Codys enhances the creditworthiness of Buy-Let propositions put to mortgage lenders.

How to Buy-to-Let

Buy-to-Let investors can start on a property search; or Codys may do this for them.

Once a property has been found, Codys will confirm whether or not it has letting potential, the range of the likely rent that can be achieved in current local market conditions and advise on the need - or otherwise -for re-decoration and new fixtures and fittings to attract good tenants and to reduce the risk of lengthy void (empty) periods. Codys recommend that all properties have gas central heating.

How are mortgages arranged through the Buy-to-Let initiative?

Buy-to-let mortgages are readily available. Your first step should be to get advice from an independent mortgage advisor. They will guide you through your options and let you know how much you can afford.

The Do's and Don'ts of Buying to Let

Think of buying to let as a medium to long term investment.

Seek advice from Codys on local market demands.

Get your sums right. Will the rent cover borrowings and costs, after allowing for void periods?

Decorate, fit out and furnish to high quality standards, especially kitchens and bathrooms, to attract the best tenants and let quickly every time.

Use a letting agent that holds Professional Indemnity Insurance to required standards, have staff trained to competency standards and are kept up to date with the latest legal and regulatory requirements.

Let personal taste cloud your judgement. Be sure the property you choose meets market requirements.

Purchase anything with potential maintenance problems like a lot of woodwork or large gardens. It will add nothing to the rental value and cost a lot to keep up.

Think that the running of an investment property to let can be left to friends or relatives in your absence. Tenants require a full management service.

Use off-the-shelf tenancy agreements from HMSO or law stationers, or forget to issue the right notices or fail to have a proper inventory and condition report made before a tenant moves in. Leave all documentation to a professional agent.

Furnish with second hand furniture or cast-off soft furnishings. These will probably contravene the Furniture and Furnishing Regulations.

Renovation tips »

What happens after Buying to Let

Codys will introduce and vet prospective tenants; prepare the tenancy agreements; advise on and arrange inventory and condition reports and changes to utility accounts and Council Tax; collect the rent and pay the balances to the landlord's account.

Codys can also pay bills on behalf of the landlord and regularly inspects the property, recommending, overseeing and accounting for necessary maintenance, repair and re-decoration.

Can a Buy-to-Let investment be protected?

Insurance cover is now available for rental protection, in the event of a defaulting tenant, and for legal expenses in addition to the normal building and contents insurance.

What other costs should be taken into account?

Letting agent's commission and management fees, Insurance (Building/Contents/Rental and Legal Expenses Cover), the costs of keeping the property in a marketable condition, service charges and ground rents - if a leasehold. (The tenant is responsible for such items as utility accounts, Council Tax and TV licence fee etc.)

Tax and allowances

Deductions against tax on rents received may be claimed for the costs of maintenance, such as insurance, cleaning, gardening, agent's commission and other reasonable management expenses (but not improvements).

The initial cost of furniture fittings and fixtures is not allowable, but the actual cost of subsequent replacement may be claimed; or, alternatively, a wear and tear allowance of 10% of the rents received may be deductible.

Note: This page is for guidance only. The responsibility for the financial decision to Buy-to-Let can only rest with the investor. Most letting agents will not accept responsibility for the validity of investments, costs incurred or for mortgage arrangements made. It should be noted that as with any investment, returns and capital values can go down as well as up; and the investor should be fully aware of the terms and conditions applied by the chosen mortgage lender. Codys have their own written terms of business for letting and managing properties.

Is letting safe? Can I get my property back?

Yes. Itís safe provided the tenancy agreements are properly drawn up and the correct Notices served. Then, in those cases where legal action is needed for repossession the court should make an order in the landlordís favour. New Accelerated Court Procedures speed up the process, without the necessity for a court hearing and take the hassle out of the very occasional problem.

What if the tenant wants to extend the term of the let?

This is very common, presenting no problem provided both parties agree and a professional agent conducts the negotiations and prepares the necessary paperwork and renewal documentation.

What about inventories?

These are essential and it is recommended that an inventory is made by a professional to avoid omissions or errors. They should always be made at the start and finish of the tenancy to identify missing items, breakageís and damages liable to be covered out of the tenantís deposit.

What insurance covers can protect a landlord?

There are two types of cover for use when letting property: Legal expenses cover, available to most landlords, and rental insurance cover, available through some agents, calculated as a percentage of the rent achieved. You must be certain to insure your property for letting and the possible empty periods between lets.

As a landlord or a tenant, I want to know, What is Management?

Management is a service provided by Codys to protect and maintain a property to the standard it was in at the beginning of the tenancy, fair wear and tear excepted. It includes all maintenance and running repairs, except for those items that are clearly the tenantís responsibility. These were expressed by Lord Denning when he said "The tenant must take proper care of the premises...he must do the little jobs around the house which a reasonable tenant would do". Both Landlord and tenant should clearly understand whether or not management services have been agreed at the outset.

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