We were delighted to be invited by Natwest in Bournemouth, to speak at their Buy to Let Landlord event held on 19th November. We spoke about the local Buy to Let market and the opportunities it presents, as well as offering some tips to help when making investment decisions, which you can find in this blog post.
Over the last few years we have seen so many of pieces of lettings-based legislation brought in by the government. Changes surrounding tax-relief, stamp duty, compliance and most recently the Tenant Fee Ban have all affected landlords in one way or the other – often by hurting their pockets - but while this does have the potential to scare people off, property investment remains a solid and worthwhile route for lots of people for a variety of reasons.
We have seen a shift in 2019 away from short term profit and gain, to a longer-term strategy of building capital for retirement to supplement pensions, and providing an asset that pays for itself.
Usually, Buy to Let lenders expect a deposit of 25%, but if you are a first-time landlord thinking of investing for the first time, with interest rates currently being so low it offers a good opportunity to test things out - to see if the life of a landlord is for you, and hopefully make some money from it along the way.
If you are a professional or long-time landlord you will be keen to take advantage of that also, and will have an idea of what you want to see back from your investment. Locally we would normally describe a ‘good’ gross rental yield as being something around or above 5%.
Our local area
Bournemouth and Poole are good areas for a solid rental investment because there is a mix of people requiring property. Generally, there is a good level of employment in the area mainly in the financial, hospitality and tourism sector. However, the local wages do not necessarily make it easy for some people to find a property to buy, which is why the private rented sector provides what they need.
Additionally, the are two universities (Bournemouth University, and Arts University Bournemouth), which firstly create the student sharer market, and then secondly, for those that choose to stay after graduation, a ‘first job’ market. Young people not yet able to go straight into a buying a property, but in jobs with reasonable income in need of good quality places to live. Often near to where employment centres are – so here, in the town centre for example, or places a little further out like Westbourne.
The range of types of property investments are quite varied from the fairly steady, one-and two-bedroom market, where initial costs will be less, giving you the opportunity to start earning your money back sooner, to larger family homes, where tenants tend to stay longer, but you have a bigger outlay and a smaller tenant pool to choose from.
Similar can be said for HMO (Houses of Multiple Occupation) – where the returns can be bigger but the risk of not filling it can expose your business plan and harm your return, we have seen recently a surplus of this type of accommodation particularly the more dated properties, which contrast with the new purpose built luxury student accommodation in areas like the Lansdowne.
A business decision
The key with investment properties, is to remember that it is a business decision designed to make you money. A common mistake some landlords make is buying a property that they feel that they would want to live in themselves, unless you plan to live in it at later date, it is wise to keep your personal tastes separate to what will perform well in a competitive market – an area we can help advise landlords with.
Also bear in mind the age and condition of a property, as things will inevitably break or go wrong – on our last website blog post, we talked about this as established research shows that on average landlords spend around £700 a year per property on maintenance, looking at our own portfolio it suggested to us the figure is much less, but this still worth factoring in, as it will affect your bottom line.
Another quick heads up, is to look out for the Energy Performance rating, this is the colourful graph you may see next to property listing. Currently the Minimum Rating that a rental property must be is E, but this is likely to increase over the next few years, rising to a D by 2025 and a C Rating in 2030. Energy improvement measures can be costly so watch out for this too.
Local advice from local experts
If you have any questions that you please don’t be shy, come and talk to us give us a call on 01202 554470 or pop in to see us at our office on Yelverton Road, we’d be more than happy to help you in any way we can with your property investments.
Even if you see properties and want us to run our eye over them we’d be happy to provide free impartial advice from an ARLA Propertymark local agent.