Southampton Buy to Let - what rents best?

I have already said that everything rents. Whilst we can’t predict the future, we can only see the demand for these properties increasing when you consider:

• The population continues to grow, but not enough housing is being built.
• The number of single person households continues to increase, and the number of families occupying 2 houses (due to marital breakdown) increases also.
• The amount of money required to purchase a property is more than many people can afford. This is resulting in an increased demand for ‘family properties’ as people increasingly turn to rental to meet their long term housing needs.

Condition of Property

We mention it again, because it’s important. Tenants would rather live in a well presented shed than a dilapidated palace! This doesn’t mean you have to spend a fortune on improvements, just make sure it’s clean, neutral, and the kitchen and bathroom are modern.

Size of Property

A 4 bed house will rent, but there’s always most demand for smaller units – studio or 1 beds close to town or 2 or 3 bed properties in the suburbs. There’s an increasing demand for 3 bed family properties out of town. People who rent don’t want hassle so are generally more concerned with the practicality and ease of a property, rather than having something they can fall in love with.

Price of Property

The bottom end of the market is in particularly high demand. A nice room in a shared house will cost about £400PCM including bills, but some people want their own space and don’t want to share. For that reason, anything you can offer to the market that’s inexpensive (under £400 plus bills or under £500 including bills) will always rent well. It doesn’t matter if it’s tiny as long as it’s self-contained. Landlords who cut larger properties into selfcontained studios do particularly well.

Housing Benefit

There’s massive demand for properties that accept tenants in receipt of benefits, particularly 1 beds and 2 beds. The Local Authority waiting list is currently in the thousands

What not to buy when it comes to Buy to let in Southampton

When investing in property, it’s easy to get it wrong. Before I was a lettings agent, I bought a new build 1 bed flat because that’s what everyone else seemed to be doing. I still have it – mainly because no one is going to take it off me for the price I paid for it!

You live and learn. But it’s important to remember that you make your money when you BUY a property, not when you sell it. If you buy at the wrong price, it’s more or less impossible to rectify that going forwards unless a rising property market saves you.

If you buy sensibly, you can also expect to sell sensibly if you ever need to. Try to avoid:

• Simply overpriced. Once you’ve established you can buy a nice 2 bed property in a given area for £X, don’t pay £X + £5,000 for one because you’re impatient. If you overpay at the point of purchase, you’re playing “catch up” regarding the value of the property from day 1 ....  So DON’T overpay!

• Needs work, and this isn’t reflected in the price. DON’T be put off by properties that need work, as these are often the best buys. But DO ensure this is reflected in the price. If it’s £X for a nice one, its £X minus £5,000 for one that needs a kitchen and bathroom.

• Unrealistic rental price. If you’re buying in an area where flats rent for £550.00, don’t expect yours to rent for £600.00 on the basis that it’s just been painted – expect it to rent for £500.00 if you don’t paint it!

• Lacking key features. If you’re buying in the suburbs to attract the family market, don’t buy the one house on the street that has no garden, or no parking. Families want gardens!

Southampton landlords - should you buy leasehold properties?

Some landlords seek to avoid flats, or other leasehold properties. There are valid reasons for this, namely:

• There’s a monthly service charge to factor in, which will negatively affect your return.

• There’s a lease that’s depreciating, and if you need to renew it, there’s an associated cost.

However, some Landlords make good money out of leasehold units. That’s because they are careful about what they buy and factor in the associated costs. They would argue:

• Leasehold properties usually cost less than their freehold equivalents to start off with.

• If the property has a long lease, this is unlikely to ‘bite’ you during your period of ownership.

• Leasehold properties tend to be more modern and as such in better internal order.

• Leasehold properties rent just as well as freehold ones. Many tenants like the ease of renting a flat.

Top tips for buying buy to let property in Southampton

If you’re lucky to find a good deal, you need to get it bought quickly before someone else steals it. I’ve seen people buy property in 7 days and I’ve seen it take 7 months. Sometimes (usually if there’s a chain) it’s out of your control, but often the length of time taken to purchase a property is something you can influence through the decisions you make.

Mortgage Companies

We all want the best rate, but in a competitive mortgage market you should also pay attention to which mortgage companies lend easily. A good mortgage broker will know this and you should take their advice. I know from purchasing myself that lenders such as The Mortgage Works move at pace and can get an offer out in 10-14 days.
 
Alternatively Barclays / Woolwich ask LOTS of questions and seem generally more reluctant to lend. From personal experience I’d favour a good rate with an easy lender rather than an excellent rate with a difficult lender, every time.

Surveyors

If you want additional reassurance regarding a property, a survey is important but you must be realistic regarding what that survey will show. The surveyor won’t want a situation where you accuse them of missing something at a later date – so they’ll mention everything! You need to be realistic that, for example, most Victorian properties will
have a “higher than average damp reading”. Don’t panic when you receive the report - when you get a list of problems, you need to ascertain if there’s anything on that list that doesn’t apply to every other house on the street.
 

Conveyancers

The best conveyancer is not the cheapest. You can buy conveyancing online for £99 but we’ll all still be here in 6 months whilst they look for the paperwork they’ve lost. A good conveyancer will get the deal done quickly - if you don’t have one, we can recommend a couple. Also, don’t forget your conveyancer works for you. Often people allow the conveyancer to set the pace of the transaction. You should be telling your conveyancer you’re looking for a quick transaction before you instruct them and chasing them regularly. People who do this purchase properties more quickly.