Date Published 10 January 2020
With the start of a new year - and, indeed, a new decade - in sight, it's a good time for property investors to take stock and perhaps make some new year's resolutions. Here are six ideas.
1. Check that your property really still is your pension
Perhaps you've been a property investor for a long time now. If so, as with anything, it's easy to slip into a rut and carry on doing what you're doing because it's easy, comfortable and familiar. However, much has changed in the world of property over the last decade. Where investing in bricks and mortar as an alternative to other forms of investment once made perfect sense, matters are no longer so clear-cut. Tougher mortgage rules, a far stricter taxation regime, and a more defined regulatory environment have made an investor's job harder and potentially less financially rewarding. While you may have other very good reasons for retaining your property portfolio, it makes sense to investigate whether you would see greater returns from investments in shares, funds or via an ISA investment trust. Additionally, don't forget that with cash or shares, you also retain the ability to liquidate your investments more quickly than with property.
2. Shop around
If you have no plans to give up on property investment, make sure you shop around as wisely as you might when making any purchase. This goes for all aspects of property ownership. In particular:
-Mortgages: not all mortgages are created equal. This is truer than ever now that many buy-to-let mortgages come with hefty arrangement fees. A good independent financial advisor is worth their weight in gold.
-Property location: if you're planning to add to your portfolio in 2020, research the location for your new house or flat carefully. Don't only go by sold property prices. Think about the type of people (students, commuters, young families, retirees etc.) who currently live in the area, existing and projected demand for rental properties, and whether there are any significant development plans for the neighbourhood that have the potential to affect its rental market.
3. Create a niche
With an estimated 4.5 million UK households relying on rental properties (figures from 2017), it can seem as if you are tapping into a captive market. However, as the frantic sell-offs of many off-plan units indicate, demand does not always match supply, particularly in large cities. Equally, it can prove tricky to attract tenants to unique properties, such as a remote rural house. However, with a little care and thought, it may be possible to carve out a niche for yourself. For example, many family renters struggle to find properties that allow pets. Of course, it's easy to see why landlords are reluctant to allow their tenants to move in Fido and Tiddles, but there are strategies you can take to reduce the risk of pet-related damage. For instance, you could ask for a larger deposit, ensure that the contract specifies that the tenants must pay for a deep-clean at the end of the tenancy, or even take references relating to the specific pets from previous landlords. If dogs and cats are your own personal red line, think about whether you could consider allowing a tenant to keep smaller pets. Tenants with appropriate outdoor space might also appreciate permission to keep chickens although, for the sake of your relationship with any neighbours, you may wish to stipulate that a cockerel is not allowed.
4. Think about your additional extras
Attracting tenants in a crowded rental market can sometimes be as simple as offering something that landlords with comparable properties are not. For example, if your property has a garden, consider including the services of a gardener. Similarly, if you're trying to attract young professionals, particularly in busy metropolitan areas, providing top-spec fixtures and fittings, such as integrated sound systems, is often a good way to get tenants through the front door. Yes, there's a risk of damage but you can offset this to some extent through the deposit and careful scrutiny of references. And, if you're in the market for a new house or flat, look at where demand is currently highest from your target demographic. For instance, is rental take-up highest in concierge-serviced apartments with swimming pools and gyms?
It hopefully goes without saying that you would consider haggling when buying a new property. However, if further prompting is needed, remember that you are likely to be in a similar position to a first-time buyer: that is, you do not need to sell a property in order to buy and thus are not in a chain. This is always an attractive prospect to many sellers and not one you should throw over in a hurry. Knowing the market is just as important: for instance, if properties are staying up for sale for a long time and sold property prices are down, it is essential to factor this into your negotiations. Finally, when looking for a new purchase, it can make sense to target a property that's being sold by an existing buy-to-let landlord. They are more likely to be hoping to cash in on capital gains than a family or other private seller who needs to make a specific sum in order to afford their onward move.
6. Consider using management agents
Many property investors restrict their interest to the financial side of buying and letting. Others are far more "hands on". While this is often a question of what suits one person doesn't suit another, it's always worth revisiting your approach periodically. Managing your own properties can seem perfectly doable when those properties are a stone's throw from where you live and when you have sufficient time to deal with the inevitable queries and problems thrown at you by your tenants. However, as time moves on and circumstances change, dealing with these issues can get trickier. Perhaps your portfolio has expanded to include properties that are further away, perhaps the demands of your day job have ramped up, or perhaps you have young children or other caring responsibilities. Whatever the reason, if meeting the day-to-day management responsibilities of your properties has increased, it's probably time to look at how else you can handle them. Management agents obviously charge a fee for their services, but this can seem like a small price when you're not the one having to locate an emergency plumber at midnight or dealing with a tenant who has locked themselves out on a Sunday evening.