Buy-to-let peace of mind
Written by Nick Cooper, Northwood
It’s safe to say that buy-to-let as an investment option is back in favour. One in every eight pounds of mortgage lending this year has been on buy-to-let, accounting for a record 13.4% of the total £1.2 trillion of mortgages in the UK, according to the Council for Mortgage Lenders (CML).
After all, it’s an attractive proposition. The rental sector has grown strongly over the past decade as average rents continue to climb and want-to-be first time buyers now have to wait until they are 37 years old* before they are in a position to buy.
Buy-to-let therefore provides homes for millions of people and if the right approach is taken, it can deliver average gross rental yields of 6.2%**. Try finding that return from a savings account!
However, whilst there is money to be made, would-be landlords need to be fully aware that Buy-to-let is an active investment and therefore one which requires both a financial and time commitment over and above the initial property purchase.
Recent research shows that around 40% of landlords pay more than £1,000 a year on unexpected costs associated with their rental property, while one in seven say they have paid more than £1,500. It can come as a shock, particularly for new landlords, who imagine that at the end of the year; they’ll have 12 times the monthly rental income in their bank account. As the statistics prove, sadly this is rarely the case.
There are also more personal side-effects to be aware of: 82% of landlords have experienced inconveniences such as missing a personal event or had to cut back on social activities due to landlord demands. When a tenant calls you out for the third time in a fortnight to fix a leaky tap and DIY has never been your strongpoint, the frustrations can build. . .
Sound like too much hard work?
It doesn’t have to be – you can have a reliable rental income and be hands off…
If you want to maximise your buy-to-let opportunity but with minimum input, Northwood could provide the solution.
Northwood’s Guaranteed Rent Service is a minimum 12 month contract whereby we effectively become the tenant: guaranteeing fixed monthly payments to you on the same day, every month, regardless of whether the property is vacant or whether the tenant stops paying.
There are no charges for setting the contract up, no tenant introduction fees, no commissions and absolutely no “hidden extras” to pay. So where’s the catch? There isn’t one. We pay a monthly rental value marginally less than the property’s market rate but in return guarantee that the rent will always be paid and will never be late – a real bonus for Buy-to-Let landlords looking to avoid cash flow issues when the mortgage needs paying each month.
Aside from the financial benefits of Guaranteed Rent, we take responsibility for managing all of the maintenance and dealing with tenants. In essence – once you hand the keys over, the rest is up to us. It’s a winning formula and one that over 13,000 Northwood landlords nationwide already benefit from.
For those looking to purchase their first buy-to-let property, here are a couple of points to consider:
Always research the market: Check local rental conditions and determine the types of renting in your area. Look for tell-tale signs that there’s a healthy rental market, like large company relocations, the opening of young/upmarket bars and shops. Don’t forget to consider the proximity of good schools and choose property with features that will appeal to the general market. Your local Northwood office should be able to help to identify the types of tenants that are looking for property in the area.
Account for every penny: Before you buy, make sure that the sums add up and don’t forget any extra ‘hidden’ costs. As well as mortgage repayments, think about landlord insurance, gas safety certificates, maintenance fees etc. Look ahead too and don’t just look at the present and near future. Try to calculate projections for 5, 10, 20 years’ time. Find out what your likely net annual rental income is minus all of the typically unaccounted for costs, try the Northwood Rental Income Calculator.
Nick Cooper is Northwood’s Managing Director. For more information about Northwood’s services please visit www.northwooduk.com
