Are you ready to be a Surrey Landlord?

I have to ask, Are you ready to be a Surrey Property Landlord?

Another day for me in my role as a Sales & Letting specialist and another conversation with a first time "investment" Landlord.

"I'm really sorry to have to ask you, you must think I'm a real idiot, but............"

Firstly, you don't need to apologise, and secondly, no, I would not / do not think you are an idiot.

Really. 

I have more respect for people that go into things after extensive research rather than those that claim to know it all and then want to blame people when it all goes wrong. Everyone has to start somewhere and I am honoured when people come to me for advice.

I know the Surrey lettings market inside out and backwards, but whatever your profession is I'm likely to not know that. Just as I would come to you for help in your profession, which is why you have come to me.  

I am a Lettings Expert and I am happy to help you. Furthermore, my advice is free and without obligation.

Firstly, you are probably worried. How does it work? What are the laws? Do I need to be qualified? What about all the nightmares I have read about? They are just some of the questions that I get asked but the one that is only occasionally voiced is. What if I lose it all? What if it all backfires? What if the property doesn't rent or the tenants stop paying rental and I cant afford to pay the mortgage?

I understand that investing in property is scary. That's why I am happy to spend time with investors to ensure the right decisions are made and its a happy (profitable) experience.

We have all seen other people do it, make it look simple, even made a tidy profit. It looks and sounds easy. But when we are dealing with our own cash, suddenly there are a lot of questions and a need to confide in someone that understands and can eliminate the fears.

Before starting to jump in, make sure you are in this for the long haul. If you’re looking to invest your money into a medium/long term investment scheme (10+ years minimum), then property investment is one of the most solid and reliable vessels available. History dictates that property prices increase over the long term. Everything that happens in between is generally part of the cycle, and that includes the highs and the lows.

Research Research Research - do NOT take only the selling agents advice

or associated rental departments advice on rental. They are after a sale. Speak to an independent Letting agents for an honest lettings appraisal - ask them to be realistic not optimistic.

Leasehold vs Freehold. Leasehold can have "hidden variables" such as the services charges that could rise and restriction on letting. Freehold has responsibilities to continually maintain the property, although at last this is under your control. Work out your rental yields on 11 months of the year and at the lowest price you are quoted. That way if the figures stack up you could get a pleasant surprise, when it lets for more and with no voids.

Take into consideration Agents finding fees, add in the costs of your legislation duties such as gas safety checks, electrical checks, cleaning, inventories, legionella testing, possible redecoration, cleaning etc. Also factor in saving 10% to off set against wear and tear and essential maintenance, if not more if the property is freehold.

How are you financing this project? I have many landlords ask if they can take a residential mortgage and just not tell the lender, but be very careful here. This is mortgage fraud and its illegal. It may seem a "safe" risk (if that's not an oxymoron) but if an accident happens and you find yourself uninsured, you will be left with a huge problem.

I know some brokers suggest its a safe gamble, but I really wouldn't go further with them, they are not looking after your best interests at all. There are many good brokers out there who will source you a decent Buy-To-Let mortgage on a variety of terms and deals, so shop around. Don't borrow to the max on a property either. I personally suggest a 60/40 split is wise and certainly the minimum I would advise landlords to put up is 25% deposit. You get the better deals and it becomes affordable. Even if the tenants stops paying rental or the property is empty on a void, the mortgage has to be paid. One mistake  I see Landlords make is to simply bite off more than they can chew.

Now to you. Do you have the personality to be a "hands on" Landlord?

Are you confident, good with people, practical, sympathetic, firm, patient, respectful, understanding, calm and tough? If you are renting privately and intending on managing the property you may have to be at one point or another all of these things. You may get tenants that play on your emotions and vulnerability if you let this side of you show. If you are unsure about dealing with tenants directly, use an agent - they should be your eyes ears and mouthpiece though the let. You need to understand that you’re effectively running a business, and that means you’ll be dealing with all sorts of people. That’s when you’ll need to make some tough decisions with conviction. Of course, there are pleasant people too, which you will also need to manage appropriately. Above all maintain professionalism with the relationship.

What can go wrong?

Well, the truth is there are lots of things that can go wrong.

I don't want to scare anyone from investing but lets be frank, lots can go wrong if its not done correctly. I advise Landlords to have a belt and wear braces. Have your tenants properly referenced, that's after you have met them and got a good "gut" feeling, take as many checks as you need to feel comfortable and then take out a rental guarantee and legal cost insurance policy to cover the areas "at risk " (ie non paying tenants and the cost of eviction). Ensure you insure the buildings and contents properly. Another thing that can go wrong, is your letting agent. From a personal relationship breakdown, staff turnovers through to misappropriation of client funds through to sudden closure. You do need to ensure that the letting Agent is signed up to the voluntary licensing via organisations such as ARLA or NLA and that they are protecting your tenants deposits correctly. Just check who you are dealing with, their background and that if they are managing the property you have a good rapport and relationship with them.

On the subject of Letting Agents, there are three "breeds".

The High Street Agent, which charge around 10% of the rental for a tenant find service and up to 17% for full management. They advertise in the window and have some walk in trade, and a highly visible presence. In my opinion though, you are paying for the office and location in your fee.

There are "hybrid" Online letting agents who offer client's the full services and personal service to local clients but are relatively cheaper than the high Street agents, with rates typically starting from 5% plus VAT for Tenant Finding and 10% plus VAT for Full management.

The there are pure online letting agents who normally are national call centres who will market your property from as little as £49.99. However you tend to have to do the rest of the work and there is minimal service. The choice is down to the individual Landlord, but a Landlord new to the business should ensure there is a degree of hand holding and support in the process.

Still ready, willing and able to become a Surrey Landlord? Great. The next steps which I will cover in the next blog are all the things that take place after the purchase.

If you are thinking of buying-to-let and want chat through some options I would be delighted to chat with you. Our advice is free, confidential and independent. Please call me, Sally Asling on 01483 280071 or 07760 787026 for free, impartial advice or email me sally.asling@kwuk.com. Very happy to have a free zoom call where you may pick my brains about all things lettings!