Is it really possible to do it yourself and save money?
As a new buy-to-let landlord, it’s tempting to look at the costs of working with an experienced and well-qualified property management company and decide to do everything yourself. After all, how hard can it be to find a tenant when demand for rented homes is up, and supply is limited? In this first part of four, I want to explore how you might search for and find tenants as a DIY buy-to-let landlord.
The Internet has made it easier to find tenants
The Internet has made it easier for buy-to-let landlords to find tenants for their properties. Combine this with an on-the-ground approach advertising in the ‘Homes to Let’ section of local newspapers. And you’ll be well on the way to securing tenants for your investment property. And if you’re still struggling, then using the power of social media could be the perfect solution to the conundrum of how to find tenants: before you know it, you’ll be beating prospective tenants away from your door.
Have a strategy to find tenants for your investment property
The key to getting your investment property tenanted is to devise a letting strategy before you start. Here are the steps that you’ll need to take:
Make sure you know the rental value
Your investment property will be a bust if you don’t figure out what your rental income will be before you advertise as a home-to-let. In fact, you should already have figured out the potential rental income and your cash flow before you even buy an investment property. The article “How much rent should I charge?”, written by Brett Alegre-Wood, The Chairman of YPC Group, details a great way to decide the right level of rent.
In reality, you’ll already be needing to do a lot of legwork at this stage: phoning local lettings agents and getting an idea about rents achievable on the type of property you are offering and the location in which you have bought an investment property. Like I said, though, you should have done all this work a long time ago.
Know your target tenant
A big part of knowing how to find tenants is knowing which tenants you are looking for. If you aim to appeal to everyone, you’ll end up appealing to no one. So know who you are targeting, and then build your marketing campaign around this.
Sell your rental property
Okay, I don’t mean you need to actually sell the property. What I should say is you need to sell the property to prospective tenants. You’ll need to draft two or three different adverts for the different advertising channels. In each, you’ll be expected to detail what makes it the ideal rental home. Details like:
- Public transport links
- Schools nearby
- Property details (bedrooms/white goods/furnished or unfurnished/parking etc.)
Your adverts should be complete, but easy to read. You might need someone to help with this (believe me, I’ve seen plenty of DIY buy-to-let landlords who have gone weeks and months without renting because their adverts don’t sell their property to tenants).
Pictures sell properties. That is a fact. So make sure you have a good camera (the camera on your phone or iPad probably won’t do your investment property justice). And make sure you know how to set up each room and then photograph for best effect.
If you’re using an online rental portal (like Rightmove) and you don’t add images, you are literally throwing money down the drain. High quality and perfectly staged images sell.
Consider offering incentives to get a tenant in quickly
Void periods cost money, so if you can minimise these, then you’ll make more money. One way to do so is to offer incentives, especially if there are plenty of homes like your investment property on the market.
You might consider an incentive like free broadband for a year. While this might seem extravagant, if it means your home is let immediately instead of in say six weeks, and the rent is £1,000 per month, then you’ve taken an extra £1,500. That’s a big bonus when starting your life as a buy-to-let landlord.
Reference your tenant and conduct viewings
By this stage, you should have plenty of prospective tenants knocking at your door. What you need to do is sieve out the bad and leave the good. So the first thing to do is to vet those applicants. I’m not going to discuss this in detail here (we’ll be doing so separately), but you will want to conduct some due diligence on tenants and reference in the following areas:
- Employment history
- Rental history
- Credit rating
Once you’ve vetted your applicants and reduced them to a shortlist, you’ll be ready to conduct viewings. Be prepared to answer lots of questions (and to ask them, too). You’ll need to be flexible with your time – prospective tenants have an uncanny knack of wanting to view during working hours or at the most inopportune times.
Finally, you’ll find your ideal tenant and pass the keys over in return for a signed tenancy agreement, the first months rent and rental deposit (which you need to promptly register).
Don’t forget that you’ll need to comply with all the laws placed on the buy-to-let landlord. Ensure you don’t forget the ten essential tenancy agreement terms and conditions.
How much could you save?
Most DIY buy-to-let landlords go the DIY route because they don’t see the value in employing a lettings agent at perhaps a 10% fee of the first year’s rent. If the rent is, say, £1,000 per month, that £1,200 a year can seem like a big bite out of profits.
As a buy-to-let landlord finding your clients, if you do all of the work yourself you’ll probably spend around £150. This cost rises if you use a photographer to give your images real gloss. If you employ a copywriter to compose your adverts, that’s another cost. And if you don’t rent quickly, every week extra that your investment property is listed online or in local newspapers will add more costs. You might have to take a day or two off work to conduct viewings, too.
The costs soon mount up. Of course, you can deduct many of these costs from your income when calculating tax (provided you keep all the receipts – your time won’t be deductible) in exactly the same way you can deduct the cost of a lettings agent or property manager.
So, if you’re lucky as a DIY buy-to-let landlord, you’ll have paid out only around £150 to find tenants and taken two or three days of your time to do viewings, compose ads, take photos, etc. But this is very rarely the real cost, especially for the first-timer. In my next post, I’ll look at a real-life story which illustrates the real cost of finding your own tenants.
In the meantime, what is your experience of being a DIY buy-to-let landlord? Has it been plain sailing, or did you find the learning curve to be a steep, uphill struggle? If you’ve decided its all too much and you want the professionals to take over then give us a call on +44 1522 503 717 to discuss your needs.