When choosing a residential investment property to rent out, there are many different choices of property available to the potential landlord.
Such as terraced, semi, detached, bungalow, 1/2/3 bed apartments.
Are there any advantages of any of these over the others?
I've heard that in a property downturn, 1 bed apartments can often be the most difficult type of property to sell. So do wise landlords stick more to houses and to 2bed+ apartments?
Is there any advantage in renting out a house as opposed to renting out an apartment?
If you are a landlord, would you potentially purchase any type of residential property provided the yield was adequate?
Full Version: What's The Best Type of Investment Property?
I prefer 3 to 5 bedroom houses let to professional sharers for several reasons:
- I don't want leasehold property, there's a 3rd party to deal with.
- 1/2 bed flats are hard to keep let because they're expensive per person
- Professional sharers are usually reliable people who choose reliable friends to share with.
- When sharing, if one person can't pay their share, the others will kick them out, something that landlords can't do without going to court
- The sharers can never work out when to move out, because usually if 1 wants to leave, the others want to stay, so they find a new tenant themselves.
- Sharers finding new tenants themselves can extend the life of the tenancy for a very long period. 1 of my places has been continuously let & rolled over by the tenants for 7 years now.
- I have never ever had a void or non payer & I believe it's for the above reasons.
- Sharers want to save rent money. Most of my tenants could afford a 1 bed flat for themselves, but they're smarter than that and would rather save. To me this means I have less to worry about, because they usually have savings and won't have trouble meeting their commitment to me, even when between jobs.
- All of my houses have at least 2 bathrooms. This is important to me, because if there's a serious problem in one bathroom, the tenants will still have facilities while the repair can be carried out. Having the extra facilities usually means there's no frustration on occasions when repairs are needed.
- It's very important that you distinguish between a shared house and a House in Multiple Occupation. Find out the rules to make sure you don't fall foul of HMO rules with your local council.
- I have a spare, brand new, washing machine ready to be shifted into one of my houses as soon as a machine dies. This delights the tenants who usually expect a washing machine problem to take a week or two to sort out.
- I don't want leasehold property, there's a 3rd party to deal with.
- 1/2 bed flats are hard to keep let because they're expensive per person
- Professional sharers are usually reliable people who choose reliable friends to share with.
- When sharing, if one person can't pay their share, the others will kick them out, something that landlords can't do without going to court
- The sharers can never work out when to move out, because usually if 1 wants to leave, the others want to stay, so they find a new tenant themselves.
- Sharers finding new tenants themselves can extend the life of the tenancy for a very long period. 1 of my places has been continuously let & rolled over by the tenants for 7 years now.
- I have never ever had a void or non payer & I believe it's for the above reasons.
- Sharers want to save rent money. Most of my tenants could afford a 1 bed flat for themselves, but they're smarter than that and would rather save. To me this means I have less to worry about, because they usually have savings and won't have trouble meeting their commitment to me, even when between jobs.
- All of my houses have at least 2 bathrooms. This is important to me, because if there's a serious problem in one bathroom, the tenants will still have facilities while the repair can be carried out. Having the extra facilities usually means there's no frustration on occasions when repairs are needed.
- It's very important that you distinguish between a shared house and a House in Multiple Occupation. Find out the rules to make sure you don't fall foul of HMO rules with your local council.
- I have a spare, brand new, washing machine ready to be shifted into one of my houses as soon as a machine dies. This delights the tenants who usually expect a washing machine problem to take a week or two to sort out.
Thanks for the info TTRTR!
I also heard if a rental property has a garden then the landlord shouldn't leave any gardening equipment, such as a landmower or shears in case a tenant injures themselves. If this is true, what would most landlords do about grass/hedge cutting? Does the landlord hire someone to come out and do this gardening?
Or perhaps it's better to purchase a rental property which has no garden?
QUOTE
I have a spare, brand new, washing machine ready to be shifted into one of my houses as soon as a machine dies.
That's interesting, that's actually a very good idea. I also heard if a rental property has a garden then the landlord shouldn't leave any gardening equipment, such as a landmower or shears in case a tenant injures themselves. If this is true, what would most landlords do about grass/hedge cutting? Does the landlord hire someone to come out and do this gardening?
Or perhaps it's better to purchase a rental property which has no garden?
Terraced housing usually has small enough gardens that the tenant can be expected to maintain without too much hassle.
Sharers don't want to do any work on the house if they can avoid it (because they'd be the only one in the group working & it starts arguments) so I shy away from places with big gardens.
It's also interesting to note that families will pay a premium when they buy a house with a garden, but tenants only want to rent the house, so as long as there's a reasonable outside space, they don't care how large it is. So places with small gardens will end up having a higher yield than those with large gardens.
One street I own in is a perfect example. One side of the street has large gardens & the other side small gardens. So the large garden side is more expensive to buy. But when they're up for rent, both sides are about the same to rent.
Sharers don't want to do any work on the house if they can avoid it (because they'd be the only one in the group working & it starts arguments) so I shy away from places with big gardens.
It's also interesting to note that families will pay a premium when they buy a house with a garden, but tenants only want to rent the house, so as long as there's a reasonable outside space, they don't care how large it is. So places with small gardens will end up having a higher yield than those with large gardens.
One street I own in is a perfect example. One side of the street has large gardens & the other side small gardens. So the large garden side is more expensive to buy. But when they're up for rent, both sides are about the same to rent.
Hi there,
i am new to this forum and dont want to trouble you with silly questions
But i think what you are doing is a really good idea there are just a feww things that puzzle me!!
Do you get 3/5 sharers togother at the beginning?
Do you use an agency or advertise yourself?
Is there an AST and if so is it in one persons name or does each person have their own?
if it is in one persons name and that person leaves what happens?
Will letting agents manage this type of set up?
If you manage it yourself how far away are you from the property.
Many thanks in anticipation
Basi
i am new to this forum and dont want to trouble you with silly questions
But i think what you are doing is a really good idea there are just a feww things that puzzle me!!Do you get 3/5 sharers togother at the beginning?
Do you use an agency or advertise yourself?
Is there an AST and if so is it in one persons name or does each person have their own?
if it is in one persons name and that person leaves what happens?
Will letting agents manage this type of set up?
If you manage it yourself how far away are you from the property.
Many thanks in anticipation
Basi
QUOTE(Time to raise the rents. @ Oct 12 2004, 08:44 PM)
I prefer 3 to 5 bedroom houses let to professional sharers for several reasons:
- I don't want leasehold property, there's a 3rd party to deal with.
- 1/2 bed flats are hard to keep let because they're expensive per person
- Professional sharers are usually reliable people who choose reliable friends to share with.
- When sharing, if one person can't pay their share, the others will kick them out, something that landlords can't do without going to court
- The sharers can never work out when to move out, because usually if 1 wants to leave, the others want to stay, so they find a new tenant themselves.
- Sharers finding new tenants themselves can extend the life of the tenancy for a very long period. 1 of my places has been continuously let & rolled over by the tenants for 7 years now.
- I have never ever had a void or non payer & I believe it's for the above reasons.
- Sharers want to save rent money. Most of my tenants could afford a 1 bed flat for themselves, but they're smarter than that and would rather save. To me this means I have less to worry about, because they usually have savings and won't have trouble meeting their commitment to me, even when between jobs.
- All of my houses have at least 2 bathrooms. This is important to me, because if there's a serious problem in one bathroom, the tenants will still have facilities while the repair can be carried out. Having the extra facilities usually means there's no frustration on occasions when repairs are needed.
- It's very important that you distinguish between a shared house and a House in Multiple Occupation. Find out the rules to make sure you don't fall foul of HMO rules with your local council.
- I have a spare, brand new, washing machine ready to be shifted into one of my houses as soon as a machine dies. This delights the tenants who usually expect a washing machine problem to take a week or two to sort out.
- I don't want leasehold property, there's a 3rd party to deal with.
- 1/2 bed flats are hard to keep let because they're expensive per person
- Professional sharers are usually reliable people who choose reliable friends to share with.
- When sharing, if one person can't pay their share, the others will kick them out, something that landlords can't do without going to court
- The sharers can never work out when to move out, because usually if 1 wants to leave, the others want to stay, so they find a new tenant themselves.
- Sharers finding new tenants themselves can extend the life of the tenancy for a very long period. 1 of my places has been continuously let & rolled over by the tenants for 7 years now.
- I have never ever had a void or non payer & I believe it's for the above reasons.
- Sharers want to save rent money. Most of my tenants could afford a 1 bed flat for themselves, but they're smarter than that and would rather save. To me this means I have less to worry about, because they usually have savings and won't have trouble meeting their commitment to me, even when between jobs.
- All of my houses have at least 2 bathrooms. This is important to me, because if there's a serious problem in one bathroom, the tenants will still have facilities while the repair can be carried out. Having the extra facilities usually means there's no frustration on occasions when repairs are needed.
- It's very important that you distinguish between a shared house and a House in Multiple Occupation. Find out the rules to make sure you don't fall foul of HMO rules with your local council.
- I have a spare, brand new, washing machine ready to be shifted into one of my houses as soon as a machine dies. This delights the tenants who usually expect a washing machine problem to take a week or two to sort out.
The more expensive a property, the bigger will be the price falls and negative equity, although the biggest percentage falls will affect the more modest properties in the least desirable areas that have risen most recently in recent years.
QUOTE(basill @ Nov 13 2004, 10:25 AM)
Hi there,
i am new to this forum and dont want to trouble you with silly questions But i think what you are doing is a really good idea there are just a feww things that puzzle me!!
Do you get 3/5 sharers togother at the beginning?
Do you use an agency or advertise yourself?
Is there an AST and if so is it in one persons name or does each person have their own?
if it is in one persons name and that person leaves what happens?
Will letting agents manage this type of set up?
If you manage it yourself how far away are you from the property.
Many thanks in anticipation
Basi
i am new to this forum and dont want to trouble you with silly questions
But i think what you are doing is a really good idea there are just a feww things that puzzle me!!Do you get 3/5 sharers togother at the beginning?
Do you use an agency or advertise yourself?
Is there an AST and if so is it in one persons name or does each person have their own?
if it is in one persons name and that person leaves what happens?
Will letting agents manage this type of set up?
If you manage it yourself how far away are you from the property.
Many thanks in anticipation
Basi
Do you get 3/5 sharers togother at the beginning?
- Yes
Do you use an agency or advertise yourself?
- I take care of it myself
Is there an AST and if so is it in one persons name or does each person have their own?
- An AST with everyone's name on it as a joint and several agreement.
if it is in one persons name and that person leaves what happens?
- N/A, but anyway if someone wants to leave, the group finds a replacement person for them and we adjust the agreement.
Will letting agents manage this type of set up?
- They do, but they're not that good at it because they like to charge fees every time something changes which the tenants don't like and also they can't be as flexible as the landlord can be.
If you manage it yourself how far away are you from the property.
- I manage them from Sweden & my tenants communicate with me mainly by email. In the last 4 years I've only had to return once in an emergency and call the plumber out once as well for a broken boiler. The other maintenance & issues I've taken care of on my regular visits and I try to do preventative maintenance to reduce the chance of emergencies. That's the record so far for 8 properties, so not bad IMO.
V. interesting post.
However, I thought that an AST had to be 6 months minimum, so not sure where you stand if one party leaves?
Also, from April 2005 the government are requiring all HMOs to be licensed...
This will require many conditions to be met.
Raise the rents... How are you going to meet all the safety conditions for fire and safety,etc with all 8 houses and deal with all the separate ASTs?
We just converted a house into an HMO at considerable expense (meeting all guidelines) and the viewings/paperwork is a lot for us to handle and we only live down the road.
However, I thought that an AST had to be 6 months minimum, so not sure where you stand if one party leaves?
Also, from April 2005 the government are requiring all HMOs to be licensed...
QUOTE
Factsheet 3: Houses in Multiple Occupation (HMOs): Licensing Scope and Schemes
Summary
The Bill proposes the introduction of licensing of HMOs.
It will be mandatory to license larger, higher-risk HMOs. Local Housing Authorities (LHAs) will also have the discretion to extend licensing to other categories of HMOs to address particular problems that may exist in these smaller properties.
The Bill also provides for a new definition of HMO, and limits the scope of licensing and enforcement action (other than in relation to Housing, Health and Safety Rating System action) to certain types of HMOs within that definition
Definition of HMO
'House in Multiple Occupation' means a building, or part of a building (e.g. a flat):
which is occupied by more than one household and in which more than one household shares an amenity (or the building lacks an amenity) such as a bathroom, toilet or cooking facilities; or,
which is occupied by more than one household and which is a converted building which does not entirely comprise self contained flats (whether or not there is also a sharing or lack of amenities); or
which comprises entirely of converted self contained flats and the standard of conversion does not meet, at a minimum, that required by the 1991 Building Regulation and at least one third of the flats are occupied under short tenancies.
And is 'occupied' by more than one household:
as their only or main residence , or,
as a refuge by persons escaping domestic violence, or,
during term time by students, or,
for some other purpose that is prescribed in regulations.
And the households comprise:
families (including single persons and co-habiting couples (whether or not of the opposite sex), or,
Any other relationship that may be prescribed by regulations, such as domestic staff or fostering or carer arrangements.
Summary
The Bill proposes the introduction of licensing of HMOs.
It will be mandatory to license larger, higher-risk HMOs. Local Housing Authorities (LHAs) will also have the discretion to extend licensing to other categories of HMOs to address particular problems that may exist in these smaller properties.
The Bill also provides for a new definition of HMO, and limits the scope of licensing and enforcement action (other than in relation to Housing, Health and Safety Rating System action) to certain types of HMOs within that definition
Definition of HMO
'House in Multiple Occupation' means a building, or part of a building (e.g. a flat):
which is occupied by more than one household and in which more than one household shares an amenity (or the building lacks an amenity) such as a bathroom, toilet or cooking facilities; or,
which is occupied by more than one household and which is a converted building which does not entirely comprise self contained flats (whether or not there is also a sharing or lack of amenities); or
which comprises entirely of converted self contained flats and the standard of conversion does not meet, at a minimum, that required by the 1991 Building Regulation and at least one third of the flats are occupied under short tenancies.
And is 'occupied' by more than one household:
as their only or main residence , or,
as a refuge by persons escaping domestic violence, or,
during term time by students, or,
for some other purpose that is prescribed in regulations.
And the households comprise:
families (including single persons and co-habiting couples (whether or not of the opposite sex), or,
Any other relationship that may be prescribed by regulations, such as domestic staff or fostering or carer arrangements.
This will require many conditions to be met.
Raise the rents... How are you going to meet all the safety conditions for fire and safety,etc with all 8 houses and deal with all the separate ASTs?
We just converted a house into an HMO at considerable expense (meeting all guidelines) and the viewings/paperwork is a lot for us to handle and we only live down the road.
The more expensive a property, the bigger will be the price falls and negative equity.
I have found studios and 1 beds to be best.
There is allways someone to rent - even if we had a major Japanese style slump for years (you never know) you can always find demand for the cheapest end.
As for selling - Ive found there is such huge demand for entry-level flats that they sell very well. If there was a crash I wouldnt sell anyway.
So, spread your risk over a larger number of properties by buying small.
Ive never had a rent void. I dont use agents. Just do a local paper add and make the rent competetive so you hold the 'whip - hand'.
It sounds obvious but the biggest mistake is chooing the wrong type of Tennant.
Go for people who are respectable. Ask for Bank statements. Ask for copy of Passport and Drivers license. Get proof of parents address in case the tennant does a runner. Get proof of work address - so you can get an 'attatchment to earnings' via county court judgement if they deafault. If poss' get 2 months deposit. Obtain a contract (I told agent I wanted to see thier contract before committing to them and then used this myself).
I also make a quick video of each property the day I let it in case of future disputes. Make sure you have them sign to say yhe cooker will be left spotless.
Ive got more expensive luxury property and found this harder to let.
I prefer no garden or roof or damp to worry about. Flats are therefore better for me. Dealing with management company is no hassle.
Good luck, hope this helps.
PS - make extremely low offers now cause there aint no buyers out there. Freind just purchased 1 bed in Colchester of £66500! will let for £410. Buy first 2 with no or 5% deposit. Say you intent to dwell. Try Standard Life and Intelligent Finance (dont have to sell to buy and income only needs to cover new mortgage.
I have found studios and 1 beds to be best.
There is allways someone to rent - even if we had a major Japanese style slump for years (you never know) you can always find demand for the cheapest end.
As for selling - Ive found there is such huge demand for entry-level flats that they sell very well. If there was a crash I wouldnt sell anyway.
So, spread your risk over a larger number of properties by buying small.
Ive never had a rent void. I dont use agents. Just do a local paper add and make the rent competetive so you hold the 'whip - hand'.
It sounds obvious but the biggest mistake is chooing the wrong type of Tennant.
Go for people who are respectable. Ask for Bank statements. Ask for copy of Passport and Drivers license. Get proof of parents address in case the tennant does a runner. Get proof of work address - so you can get an 'attatchment to earnings' via county court judgement if they deafault. If poss' get 2 months deposit. Obtain a contract (I told agent I wanted to see thier contract before committing to them and then used this myself).
I also make a quick video of each property the day I let it in case of future disputes. Make sure you have them sign to say yhe cooker will be left spotless.
Ive got more expensive luxury property and found this harder to let.
I prefer no garden or roof or damp to worry about. Flats are therefore better for me. Dealing with management company is no hassle.
Good luck, hope this helps.
PS - make extremely low offers now cause there aint no buyers out there. Freind just purchased 1 bed in Colchester of £66500! will let for £410. Buy first 2 with no or 5% deposit. Say you intent to dwell. Try Standard Life and Intelligent Finance (dont have to sell to buy and income only needs to cover new mortgage.
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