From my research, I found that there were lots of things to consider for BTL, some of which I list here:
- Location – is the property in an area with a good rental market, is it close to amenities and convenient for public transport?
- Property type – house or apartment/flat? The latter will generally require the payment of management fees for the upkeep of the apartment block/facilities.
- Target tenant – who do you want to rent out to? Young professionals? Students? People on benefits? Families?
- Rental yield – rental yield is the annual rent received as a percentage of the purchase price of the property, eg, a property bringing in £10k worth of rent that costs £200k has a 5% yield, a useful guide to compare different properties and their potential as BTLs. Usually, the higher the yield, the better the opportunity but all other factors need to be considered.
- Landlord duties – be a hands-on landlord, seeking out tenants, dealing with and sorting out tenancy issues, be on call should boiler etc need repairing, or employ a letting agent to handle all the hassle but at a cost?
- Size of the mortgage – how big/small, what is affordable?
- Tax implications – rental income is taxable, but can be offset by mortgage interest etc. Self-assessment is required
After nearly a month of research, I’d made up my mind that I was going into Buy To Let! A big decision, as I was doing this all on my own – it was very scary yet very exciting!
So, what was I looking for?
1. A one bedroom apartment, close to Manchester city centre.
2. My budget was £65k (to any Southern folks reading this, this is still pretty much average price for a good but basic one or even two bed apartment in many areas of Manchester).
3. The purchase would be made using my funds and a small mortgage.
4. Target tenants – young professionals
After ringing around several estate agents, I finally found one that was going to be open on the Bank Holiday so I made an appointment to view several properties that day.
Of the four that we looked at, one was out of my price range and the other three, whilst decent, needed quite a bit of work doing, ie more than just a lick of paint required. On the way back to the office, the estate agent said that there was a property that wasn’t yet on the market as the owner wasn’t sure if he wanted to sell or let. I agreed to have a look.
As I walked into the apartment, I knew immediately it was what I was looking for! I tried very hard to hide my enthusiasm from the estate agent as I asked him what the asking price was. He said offers over £60k would be considered and I nearly laughed out loud that it was within my budget! I asked what rent could be expected and he said £450 pcm was the going rate in the area, so the yield would be 9%. Ground rent was £250 pa, management fees around £900 pa. I said I would call him about an offer when in fact, I wanted to make the offer then and there!
When I got home however, my excitement somewhat cooled – I wasn’t sure that I should just choose the first property that I liked and so quickly after only viewing a few other properties. I mulled it over for a week and finally, gut instinct prevailed so I decided to jump in with both feet and made an offer of £60k, which was accepted!
- Modern one bed apartment, 6th (top) floor, lounge opening onto the kitchen, with a small balcony.
- Located 3 miles from city centre, walking distance to a bus stop and two tram stops. Also walking distance to Old Trafford football ground.
- 2 years old but had never been lived in so it was like NEW!
- Brand new quality fitted kitchen – oven, fan extractor, fridge freezer, washing machine and dishwasher, all still wrapped in plastic sheet and the polystyrene they were shipped in!
Fees: Mortgage fee – £499, mortgage arrangement fee – £995
I decided to use the solicitor who managed the sale of my house since she had been fairly competent, easy to contact and good with her communications, although her fees were above average.
Fees: £840 (Conveyancing, etc)
My mortgage provider NatWest conducted their basic survey of the property. I also paid for an independent snagging inspection (as the apartment was still classed as a new build), which highlighted defects such as kitchen cupboard doors that didn’t shut properly, light switches on the wrong way round, untidy paintwork etc. These things were all rectified by the builders at no extra cost.
Fee: Standard inspection £150, snagging inspection £185
..a little over two months after I initially started looking into it, I surprised everyone (including myself) by becoming the owner of a buy to let property! Woo hoo!
Of course not. It’s certainly not in the posh end of town but over the years, the area has seen a lot of improvement and the council has pumped in a fair amount of investment to regenerate the area.
There was a big patch of land over the road from my apartment being renovated for something, either more residential or perhaps business properties (nothing serious or untoward, according to my solicitor’s conveyance report) and the boards surrounding the area depicted some rather colourful graffiti:
In Part II, I’ll talk about how I got my apartment ready for tenants and my experiences thus far as a landlord.