Date Published 18 July 2016
At John Wilcox we have an extensive understanding of the lettings market in Kensington and Chelsea, Holland Park and Notting Hill, and we have put together a five-part guide to the process which we hope will give you a good idea of the how to get the most from your property.
Part III: The Lettings Game for the Landlord
Your property is an investment, and just like any other you need it to perform – yet the Lettings Game for the Landlord is far from a simple one. For the series of challenges you face as a property owner, there is our series of guides to run you step-by-step through the process.
Investing in property: Putting it in financial perspective
Currently gross yields from let property nationwide return an average of 4.17%; whilst properties throughout Prime Central London (PCL) are more likely to produce a return of approximately 2.5% – 3%, they have historically produced excellent capital growth and are well hedged against volatility in the market. The overall requirements of your investment must not only be seen in terms of yield, but also capital appreciation and wealth protection.
The 2016 Central London Market: In facts and figures
Property in Central London continues to outpace and outperform many other regions in the UK, as the following rental averages illustrate; Kensington (average rental £750 per week – rental price range £210 – £4350), Chelsea (average rental £823 per week – rental price range £210 – £9995), Holland Park (average rental £871 per week – rental price range £579 – £4977) and Notting Hill (average rental £563 per week – rental price range £170 – £1950).
Void Periods: Income downtime, yet essential nevertheless
Periods where your property sits idle, free from tenants and income, are far from ideal – yet this downtime is often an essential period in which you can carry out improvements and vital maintenance. Previous tenants and your lettings agent can serve as sources of guidance and feedback for this.
Maximum yield: Taking a step back and thinking logically
Achieving maximum yield is a question of the perfect balance between timing, area and property type. To inform your choices, you should seek a specialist, local lettings agent who can advise you on which properties rent well and what the expected yield may be.
To be successful in the lettings market, you must think like a landlord – be logical. Treat it like a business and don't take emotional decisions. This means overlooking financially meaningless features, such as a nice view or appealing garden; these elements are far outperformed by the size of the property and the local amenities (such as infrastructure, schools and shops).
Equally features such as a communal swimming pool or concierge service are often very attractive to tenants, but are usually accompanied with service premiums which may ultimately rule the property out as the running costs will eat into the yield.
Buying new versus buying old
There are pros and cons for both buying old, and buying new. Whilst purchasing a new property can provide peace of mind that there won't be any surprise costs for maintenance that can come along with an older property, you may face complexities such as non-existent Residents Associations, lack of understanding of building infrastructure etc and possibly no managing agents.
Buy old, and considerable structural issues may arise that require a contingency fund – a luxury for which few landlords plan. Investing in a full survey is also a must when purchasing old.
When buying new, research into the lease holding company and property management firm can help provide at least some peace of mind as to reputation and intentions of the freeholder.
Reinvesting in the Property
Reinvesting in a property, and handling the tasks that can make your investment more appealing to tenants, can drive rental yield up, and drive down the length of tenant-free voids you face. However it's important to truly get to grips with a locality's rental ceiling – every area will have one, and beyond the top end rent that can be expected money spent on further features, extensions and renovations won't provide any ROI. Again, a lettings agent can advise you on this.
A primary focus of yours regardless of the work being undertaken is ensuring that your property is as durable as possible. Here are some common problem areas with rental properties (and tips to avoid them):
– Choose a hard wearing kitchen surface that's non-porous (such as quartz in preference to wood, where germs can multiply if not sealed properly; and granite and marble can crack and stain if not treated correctly);
– Invest in a robust bathroom as this is one room which needs to stand up to demanding usage (ideally you should consider choosing darker tiles with dark grouting, as white grouting can have a habit of going mouldy);
– If you're considering replacing the boiler then invest in as good a one as you can afford – the amount saved in maintenance bills down the line ensures that this investment is more than worthwhile.
Good & reliable tenants: The importance of a lettings agent
For those just starting out in buying to let, the temptation to find a tenant without an agent's help can seem appealing – however the Lettings market can be a legal minefield, and the importance of due diligence when checking into potential tenants is not to be underestimated. Typically those who try their hand at this find that the process is far more problematic, time-consuming and laborious than they could ever have imagined.
What's more it's the job of a lettings agent to ‘sell' the property to potential tenants, in the process potentially driving down void times and securing the best possible rental yield.
Your letting agent would also be responsible for:
– Undertaking a full market appraisal;
– Finding good tenants on your behalf;
– Checking a tenant's ID, income, employment, references and credit worthiness;
– Drawing up a legally binding tenancy agreement that protects both landlord and tenant alike.
– Protecting the Deposit, which is a legal requirement for all Landlords
A word of warning: Don't simply opt for the cheapest lettings agent; they will likely compromise on background checks, service coverage (such as inventory checks) or customer service. It's truly a false economy and what you save on cost you lose in peace of mind.
John Wilcox are a leading lettings agent for Central London – and renowned, trusted specialists for landlords who have property throughout Kensington and Chelsea and the remainder of Prime Central London. If you believe that our team can help realise the potential of your property, then don't hesitate to get in touch – we'll be only too happy to help.