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BUY. REVAMP. RENT. REPEAT: FOR SUSTAINABLE LETTINGS SUCCESS

There are many different models of buy-to-let, but a proven winning formula is buying a property in need of renovation, upgrading the specification, then releasing the increased equity to fund another buy-to-let project.

 

Homes in need of work cost less to buy, which immediately reduces the cost of stamp duty. And when you’re not paying for somebody else’s taste, you can add value by updating the interior and identifying untapped potential.

 

With tenancies getting longer and renting becoming a lifestyle choice, tenants are looking for high-quality homes to live in for longer. By meeting this continually growing demand, you’ll achieve higher rents and grow a profitable long-term business.

 

Finding suitable homes to renovate, getting the specification right, and having the finance in place for the purchase and works are essential elements of any successful project. So here’s our comprehensive guide to the “buy, revamp, rent, repeat” system used by many successful landlords.

 

 

BUY-TO-LET COSTS AND FINANCE

Before you go hunting for a buy-to-let project to renovate, your first step is to confirm your spending power and budget for the extra costs involved with buying and financing a rental property.

 

The first and most important thing is that buying a second or investment home attracts additional Stamp Duty, so make sure you factor the upfront expenditure into your plans.

 

Buy-to-let mortgages also work differently:

 

  • loans are usually capped at 75% of the property valuation
  • lenders require a monthly rental income of at least 125% of the mortgage payment
  • interest rates and fees are generally higher than residential loans

 

Most buy-to-let mortgages are fixed-rate and, just like residential loans, have a penalty for repaying the balance before the end of the fixed-rate period. Savvy landlords often take out a standard variable rate first, then switch to a competitive fixed-rate after renovations to avoid wasting thousands of pounds in charges.

 

Aside from dipping into your savings, options for funding the renovation works include:

 

  • rolling the costs of the works into your buy-to-let mortgage
  • short-term refurbishment bridging finance
  • releasing equity by remortgaging your own home
  • taking out a secured personal loan, also known as a second charge

 

Given all of the above, we recommend speaking to an independent financial adviser to clarify what you can borrow and which lenders and loans are right for you.

 

 

SOURCING HOMES TO RENOVATE

Once you’ve confirmed your budget and chosen location, it’s time to start looking for a property with the right potential.

Trawl the property portals

To find potential renovation projects, select the type of property you want (a 3-bedroom house, a 2-bedroom apartment, etc.), then reduce the maximum price band by 10-20% of the typical market value. This will remove the already-perfect homes from your results, making it easier to find the ones that need work.

 

Approach local estate agents

The property portals tell you what’s on the market, but local estate agents know about homes that are coming soon.

 

Many investment buyers approach agents, so make sure you have your funds in place and know exactly what you want. Be specific about the type of property you’re looking for, the streets you’re most interested in, and how much work you’re willing to take on.

 

Be friendly and professional, then stay in touch with the ones who seem most promising.

 

Look for auctions

Because they attract investment buyers, auctions are a reliable source of unmodernised and neglected homes. A successful bid is a legal commitment and, because of the speed required to complete the purchase after the hammer falls – usually 28 days – most auction sales are to cash buyers.

 

It’s not impossible to buy at auction with a mortgage, but you’ll need to pay for a survey to be carried out before the auction and have a mortgage offer in place. Even then, if your bid is not the highest on the day, you’ll lose any costs you’ve incurred.

 

Pound the pavement

Not everyone has the time or inclination to wander the streets in search of neglected homes, but it can create opportunities. If you’re not comfortable knocking on doors, you could either leave a note with your contact details, or talk to the local agent you liked the most and ask them to follow up the lead.

 

 

 

THE RENOVATION GAME

When taking on a renovation project, your best bet is to start small and know your limits: don’t buy a massive wreck with multiple structural problems if you’re new to the game. Take the time to build your experience, grow your knowledge and gather a team of trusted contractors.

However complex or straightforward the works, it’s vital to get the finish right. Too cheap and your buy-to-let will be difficult to rent with a disappointing income and a high turnover of tenants. Too expensive, and you’ll be out of pocket with a low return on your spend.

 

If you’re unsure of the correct specification for rental property in Leeds, give us a call on 0113 460 2416 or drop us a line at info@silverspringlettings.co.uk for some guidance.

 

Meanwhile, let’s look at different types of projects.

 

Complete refurbishment

This is for the confident expert and requires a building contractor and full team to gut a property and start from scratch.

 

Having everything new will generate the highest income and protect your property’s value for many years, but refurbishments are expensive, and you should budget for surprises and delays.

 

Conversion

Many houses (particularly Victorian terraces) divide easily into apartments, and plenty of commercial spaces make excellent homes.

 

Although converting property can be highly profitable, it’s also complex. You’ll need specialist development finance, and you’ll be dealing with local authorities, architects and construction firms. There’s also extensive new-homes regulation to satisfy. In short, not for the novice.

 

Modernising

Mortgages are much easier to get on habitable properties: lenders mainly look for a working kitchen and bathroom, even if they’re old. You may get lucky with simply replacing those, stripping off 70s wallpaper and replacing swirly carpets.

 

Watch out for wiring and heating. Boilers are easy enough to replace – you might even be able to retain existing pipework and radiators – but installing an entirely new heating system or rewiring can be more disruptive. If you need to channel into walls and ceilings, it’ll mean more expense with repairs and replastering.

 

Remodelling

Changing a home’s layout can release untapped value and income, usually by increasing the number of bedrooms. Examples include turning an unused loft into a master suite, or relocating the kitchen into the living room to gain an extra bedroom or study.

 

In freehold homes, you’ll generally need simple building regs permission from the local authority. For leasehold, you’ll also need approval from the freeholder, and you’ll need to update the lease plan to reflect the new design.

 

Refreshing

Unlike unmodernised homes, those in need of redecoration are often up-to-date but poorly maintained. They can look a lot worse than they really are, which means they can sell for less than they’re technically worth.

 

Look for superficial issues: scuffed and damaged walls, dirty floors, greasy kitchens and overgrown gardens are all simple enough to put right, but they can be off-putting to regular homebuyers.

 

 

RENTING OUT YOUR PROPERTY

As soon as you’ve completed your renovation project, it’s time to find tenants who’ll take good care of it.

You’ll get the best income and the best tenants when your letting agent:

 

  • is local to your property
  • has a history of renting other similar homes nearby
  • uses high-quality photography in their marketing
  • writes enthusiastic descriptions
  • advertises on at least one of the major property portals
  • has a management department
  • has a thorough referencing procedure

Ask every letting agent you meet for examples of homes they’ve let that match the quality and location of your rental property, then check their reviews on Google for an idea of how successful, professional and helpful they are.

 

Finally, don’t forget one last essential element: how does it feel to talk to them? Your letting agent should be someone you enjoy talking to and feel you can trust, so are you filled with confidence and the sense that you’re in good hands?

 

Keep looking until it feels just right.

 

 

REPEAT THE PROCESS

After you’ve renovated, rented out and refinanced your buy-to-let, it’s time to look for your next project.

Before you do anything else, take a moment to review your first venture. How did everything go?

 

  • Was it easier or harder than you expected?
  • What aspects of the project did you particularly enjoy?
  • Are you comfortable taking on the same amount of work again?
  • Is there a new or bigger challenge you’d like to take on?
  • Did you learn anything about dealing with suppliers and contractors?

 

With more experience, you’ll find your perfect niche. You might be in the mood for more ambitious projects to flex your creative muscles, or you might prefer less work and faster turnarounds.

 

As you become known among local estate agents as a reliable buyer and a landlord with high-quality homes, you’ll move to the top of their list of people-to-call when a suitable future project becomes available.

 

And with the right formula in place, you can recycle your initial deposit, then refinance your buy-to-lets to fund future projects, time and time again, leaving your savings free for enjoying life.

 

 

Final words

Buying, renovating, renting and refinancing buy-to-let property is a proven system that you can repeat to create ever-increasing returns. It’s a solid way to build a portfolio of high-quality homes that tenants enjoy and love, all the while growing in value to create a secure financial future for you and your family.

 

To begin or expand your lettings portfolio, or to talk about the buy-to-let market in Leeds, call us on 0113 460 2416 or drop us a line at info@silverspringlettings.co.uk – we’re here to help you become and stay a successful landlord.

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2021 RENTAL REVIEW: A THANK YOU TO LANDLORDS & TENANTS

As we approached the beginning of 2021, hopes were high of a return to normal, with Covid and Brexit seemingly in the rear-view mirror. But the year turned out very differently, and both have continued to feature strongly in everyone’s life.

 

With supply shortages, lockdowns, the end of furlough, tax changes and a whole heap of uncertainty, we think it’s fair to say that 2021 has been a bit of a jungle!

 

From our perspective, the year also showed how relations between landlords and tenants in the private rental sector are not a scene of constant combat. In fact, the market is more friendly, open and communicative than we’re sometimes led to believe.

 

So, to end 2021 on a high note, let’s acknowledge the challenges landlords and tenants have faced, along with how they’ve met them and what the future may hold.

 

 

LESSONS OF THE LETTINGS MARKET

Just as in 2020, the property market was allowed to remain open through the lockdowns of 2021, with the Government recognising the importance of people’s lives at home.

It’s so much more than an economic decision, with our emotional well-being heavily improved by living somewhere that meets our needs and reflects our lifestyle. In particular, as working from home remained the norm for so many people, there was no shortage of tenants hunting for extra space both inside and out.

 

Virtual viewings, social distancing at face-to-face appointments, managing PPE and hygiene – we’ve all mastered all sorts of skills to keep each other safe while finding a place to live. And we’ve mostly managed it with a smile.

 

More than anything, 2021 proved that absolutely nothing gets in the way of our national obsession with making a new home.

 

 

LANDLORD & TENANT CHALLENGES

Perhaps the biggest challenge for private landlords in 2021 was the final phasing out of mortgage interest relief on buy-to-let homes.

Already hit with extra Stamp Duty/LBTT that increased the costs of buying an investment property, many existing landlords decided to sell up and exit the rental market altogether.

 

It remains to be seen what they’ll choose as an alternative investment strategy. Perhaps some will return through the newer business models we covered in our article on https://cutt.ly/TUr3AZ2.

Meanwhile, tenants faced uncertainty with the end of furlough and concerns over the pandemic’s effect on the economy and employment. This made it essential for letting and managing agents to provide a listening ear for any tenant who thought they might run into difficulty.

 

Our experience was that tenants prioritised their rent over other costs, finding savings where necessary to avoid arrears building up. Our landlords were also flexible wherever possible, meaning we saw very few problems among the homes we let and manage.

 

 

SHORTAGE OF RENTAL HOMES

We’ve always had more tenants looking for a home in Leeds than properties available, but 2021 saw a huge drop in landlords and rental stock.

As landlords sold, their properties were snapped up by eager buyers who took advantage of the Stamp Duty/LBTT holiday. This removed rental homes from the market and increased competition for those that remained.

 

While many tenants became homeowners, the lack of rental stock hasn’t gone away, so the competition for homes is almost certain to continue throughout 2022. A survey of 500 landlords by Simply Business found that only 7% had plans to expand their portfolio, while Zoopla recorded the supply of rental homes in Q3 at 43% below its five-year average.

 

When the housing shortage is most acute and the potential for rental income so high, it’s ironic that the increase in upfront purchase costs and ongoing taxation has created a financial barrier for private landlords to invest.

 

 

OPPORTUNITIES FOR THE FUTURE

As with all difficulties and obstacles, opportunity is never far behind. Many landlords see buy-to-let as key to their financial future and are exploring new ways to grow a sustainable portfolio.

Anything that makes tenants’ lives easier and more enjoyable, particularly the busy professionals that many landlords want to attract, will always be met with enthusiasm.

 

As renting becomes a longer-term lifestyle choice, tenants are actively seeking comfort and permanence: there’s a genuine market and real desire for better-quality places to live. Whether it’s a single occupancy or a multi-let, tenants are happy to pay a premium for a higher specification and a focus on modern design in empty and furnished homes.

 

Building to rent also shows a lot of promise, where landlords partner with construction firms to buy land and build on it. It’s a model that reduces acquisition costs and slashes the Stamp Duty/LBTT liability, thus removing two major obstacles for buy-to-let investors.

 

 

THANK YOU TO EVERYONE

Landlords, tenants and letting agents have a symbiotic relationship that forms an essential part of the property market.

Most landlords are regular people who take real pride in offering homes that are comfortable and enjoyable places to live.

 

Tenants, meanwhile, are generally easy to deal with, look after their homes, pay their rent on time and live as responsible residents and neighbours.

 

Of course, problems sometimes arise, and that’s where managing agents come in to provide perspective, guidance and solutions. The vast majority of tenancies are amicable from beginning to end, and that’s down to the people involved.

 

Perhaps this doesn’t get aired enough, so we’d like to say thank you to all our landlords and tenants for weathering the storm – it’s been quite a year for everyone!

 

 

Final words

That just about completes our roundup of the lettings market for 2021. Wherever you’re spending the festive season this year, we hope you’ll have a very merry Christmas that leaves you refreshed and ready for 2022.

 

And if you’re thinking of becoming a landlord or expanding your portfolio next year, we’d love to help. Call us on 0113 460 2416 or send us a message at info@silverspringlettings.co.uk for a friendly chat about property in Leeds and the local buy-to-let market.

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LETTINGS TRENDS 2022: A LANDLORD’S GUIDE TO FUTURE DEMAND FOR BUY-TO-LETS

What are your plans for your buy-to-let business next year? Buying your first rental property? Upgrading your portfolio? Or expanding into new parts of the lettings market?

 

Keeping up to date with market trends is the cornerstone of any successful business, and being a landlord is no exception. By offering homes that offer a comfortable and modern lifestyle, you’ll continually attract high-quality tenants and market-leading rents.

 

Some of next year’s trends began life in city centres and are spreading further out, while others reflect evolving home life: flexible, sociable and economical are the buzzwords for next year! Climate consciousness, energy bills and outside space are among the biggest concerns of tenants, while new business models are creating more profitable returns for landlords.

 

So, let’s take a look at where the lettings market is going so you can plan your buy-to-let strategy for 2022.

 

 

GARDENS & OUTSIDE SPACE

The garden took on many new roles during Lockdown, with additional duties of pub, cafe, coffee shop, park, gym and even office. Searches on the property portals became more focussed than ever before on homes with some sort of outside space, and there’s no sign of that changing.

A Rightmove study found gardens topped the list of tenant ‘must haves’, with 49% saying they valued outdoor space above all else. If you’re looking to begin or expand your portfolio, don’t underestimate the draw of a garden or balcony.

 

Tenants expect to buy their own outdoor furniture, but consider these qualities for an outside space that gives year-round enjoyment:

 

  • Attractive and easy to care for
  • Decking, patios and simple planting
  • Exterior lighting
  • Outdoor heating – an infrared heater is an inexpensive touch of luxury
  • Privacy – even a trellis on top of a wall or fence can make all the difference

 

Remember that a garden doesn’t have to be huge to be popular. Families will generally look for a lawn and space for children to play, but single renters, couples and sharers tend to prioritise the minimal maintenance of patios and balconies.

 

 

WORKING FROM HOME

A recent BBC survey said 79% of business leaders and 70% of the public thought that working from home would continue in some form.

The pandemic has shown that people don’t necessarily need to fit their lives around their work anymore. Many are seizing the opportunity for change: some by going self-employed, others through flexible working that mixes days at the office with days at home.

 

This means that single bedrooms have found a new life and audience. Historically landlords looked for two double bedrooms to attract sharers, but one double and one single bedroom is the perfect solution for couples or singles who need a dedicated workspace at home.

 

Of course, some people simply need a place to sit with a laptop that isn’t the sofa or bed. Aside from dining tables and breakfast bars doubling up on duties, we see small desks appearing in bay windows, alcoves, under stairs and on landings as people create unintrusive work corners.

 

Are you unsure where a home workspace would fit in your buy-to-let? We can help you identify suitable locations to show potential tenants how well your property works for their lifestyle.

 

 

ENERGY EFFICIENCY

Two of the biggest news stories right now are climate change and rising utility bills. It’s a double whammy that’s causing everyone to look even harder at their energy consumption, for both the cost to the planet and their bank balance.

Tenants are asking more and more about running costs when we’re out on viewings with them, which makes the energy efficiency of your buy-to-let an important factor in its rentability. Government legislation is also set to tighten even further.

 

Not all energy improvements are expensive or require major work, and you can start with simple solutions like:

 

  • low-cost flow restrictors to taps and toilets to cut water consumption;
  • room and radiator thermostats to optimise heating use;
  • insulation of the hot water tank;
  • draft excluders over letterboxes and around doors to reduce heat loss;
  • appliances with an eco function (be sure to ask your agent to point them out).

 

Older homes tend to be less energy efficient, so if you have drafty single glazed windows or zero insulation, talk to your managing agent about a timetable for bringing them up to date and keeping your property in demand.

 

 

CO-LIVING

If you’ve not heard of co-living, think of it as a deluxe version of HMOs and multi-lets. It’s become big in purpose-built apartment buildings from corporate landlords, but there’s nothing to stop private landlords from increasing their income by offering something similar in houses.

Tenants already share, but co-living gives them a more coordinated experience around their outgoings, home life and how a property is run. Think:

 

  • weekly cleaning;
  • bills included;
  • a focus on design-led specification;
  • smart TVs and desks in each bedroom;
  • comfortable & sociable living spaces with high-quality furniture;
  • additional shared bathrooms or en-suites.

 

With its upgraded fittings and enhanced lifestyle, co-living has shown that busy professionals will pay extra for sharing with like-minded people who value a well-managed and stylish place to live.

 

 

BUILD TO RENT

If you’re looking to scale your buy-to-let business, have you considered building to rent (BTR)?

As the tax liabilities for lettings have increased, landlords with a long-term view are exploring more profitable models. The cost of building a property is less than its full market value, and Stamp Duty is only payable on the price of the land rather than on each home. All of that can quickly deliver savings of many tens of thousands of pounds.

 

Most new-build homes are built around owner-occupiers who prefer private spaces, but tenants appreciate shared amenities like communal terraces, co-working areas and social events. The idea is to create a place where tenants feel part of a permanent and dedicated rental community – somewhere they cherish and want to stay for the longer term, even moving within the building as their lifestyle changes.

 

Building to rent also gives you more control over maintenance and repairs. When you own the building and all the apartments within it, you can simply get on with works without needing to wait on the owners of each home for consent or access.

 

 

Final words

By keeping on top of market trends and evolving lifestyles, buying-to-let can still be a profitable business both now and long into the future.

 

If you’re a landlord in Leeds and you’re looking for a letting or managing agent to help you optimise your lettings portfolio, why not get in touch? Call us on 0113 460 2416 or message us at info@silverspringlettings.co.uk for an expert and friendly chat.