Buying a house or an apartment as an investment can be a great strategy.
However, it isn’t without its challenges, and the difference between a hassle-free, revenue-generating asset and a headache is proper management.
To maximise a property’s potential, you need to ensure it offers potential for appreciation, good cash flow, and it’s managed efficiently.
After you have researched, found, financed and obtained legal advice on a purchase, your rental property will require two types of management:
Regardless of the property you buy, the building or development will need some level of management. If you own a house you need to have maintenance on hand should you have any problems, and if you bought a new build apartment, there would usually be a company on-site that can deal with most issues, and the annual service fee will cover the cost.
Service fees can also include luxury amenities and facilities in large apartment blocks. Therefore, it’s essential to take cost into account as they can seriously reduce the income you receive after expenses. Be sure to read the contract thoroughly, so you are aware of any potential issues.
Service and maintenance costs will typically cover things like:
- Maintenance of communal areas & gardens
Good rental management is critical to the success of any rental property, and you want to do your due diligence before choosing a company to manage that for you.
Asking for recommendations and speaking to clients that use the firm can be helpful. Plus, failing to carry out sufficient research is the most common mistake investors make when appointing an agency. Also, be sure to shop around as fees can vary a great deal. The standard yearly charge is usually between 10-12%.
A typical letting & management company will offer:
- The marketing and advertising of the property
- Arrange tenant viewings
- Interior photography
- Tenancy contracts
- Tenant screening, referencing & credit checks
- Inventory check-in & out
What you need to know
Firstly, when choosing an agent, make sure they are a member oF NALS (National Approved Letting Scheme), ARLA or the SAFE Agent Scheme and they are registered for client money protection.
In addition to the above, a good letting agent should have an in-depth understanding of the local market and be able to advise you on the best way to maximise the rental income. They will be able to recommend the type of tenants to target and ultimately, the overall strategy that you should implement to gain the most from your investment. Also, it is imperative to find out what the agents referencing criteria is for tenants as it can vary massively.
While you may view your property to be high spec, luxurious, in-demand and worthy of achieving high rent, be prepared that potential tenants in the market may not share the same view. Be sure that the rate of rent you are advertising is in-line with the market average for similar spec properties in the area.
There are ways to increase the potential and desirability of your investment, and things like high-quality furniture, good wi-fi, and state of the art media equipment can make a big difference. Also, if your property is in an area with high demand, be sure to do whatever you can to make it stand out from other options in the market.
Going the extra mile can make a huge difference, and adding some extra touches can help you avoid void periods and help you achieve higher income.
Be sure to do your own research as it’s not uncommon for enthusiastic letting agents to over-promise to win your business. Again, if you follow the advice above, you should be able to avoid that as any decent agent will be looking to form a long-term relationship and repeat business.
Tax and Insurance
As the income generated from your property will be derived in the UK, it is essential to seek out professional tax advice. There are a lot of benefits available to non-residents and overseas landlords. However, these may differ according to your nationality. You will also need to register with HMRC as an overseas landlord to mitigate your tax liability, and a good letting agent will be able to assist you in this area.
If you are investing in an older property, you will need to have building insurance in place, but if you have opted for a new-build development, then it should come with a 10-year structural warranty. Full landlord’s insurance is also highly recommended, so you are protected for legal expenses, loss of rent, malicious damage and empty property cover.
If you are an expat or overseas investor, you will likely need to seek out the help of a letting & management company to assist you with your investment property. As managing a property from overseas is probably more hassle than it is worth. However, not all agents are created equal, but if you follow the advice and carry out the instructions listed above, you should be able to avoid a lot of the issues that can potentially arise.
Through our time in the industry, we have built relationships with some exceptional agents. If you would like more information or an introduction, Contact us here.
Article by: Rory van den Berg