Lucinda Newell - The Super-Sleuthing Property Rental Expert - One Woman and Her Dog....

To be seen pottering along the highways and byways of Luton in her Mini Clubman, her trusted Scottie Malcolm at her side, our super sleuthing property rental expert Ms Lucinda Newell is on the case on your behalf!

I was doing some shopping in town the other day and bumped into Rob Wellstead, the rather dashing young man who runs Lenwell and who looks after my small portfolio of rental property. He thanked me for my regular contributions to their newsletter and asked if I would like to provide a few tips by way of a guide to being a successful landlord. I said I would be delighted so here goes! Firstly I believe that doing one’s sums accurately is an important step on the way to becoming a successful landlord. Get your sums and your choice of property right and you can cover the costs of running a property for the life of a mortgage and end up with a healthy property value at the end of it all. Lots of landlords, including myself, have benefited hugely from rises in price over our period of ownership, with some investments even doubling in value. A minor downside to this potential upside is that you have to sell the whole property in order to release any of the profit and, of course, once you do that, you lose the rental income as well. The main risk is that if you get your sums and property selection wrong, you could find that your 'nice little investment' is a severe drain on your resources. But what level of earnings can you realistically expect? The yield of a property represents the year's rental income, expressed as a percentage of the property's capital value. For instance, say you buy a property for £100,000 and rent it out for £800 per month, if you were to have no void periods in the year (which is the assumption that is usually made when calculating gross yield), you would receive £9,600. This equates to a gross yield of 9.6 percent. When considering yield, remember that these are usually quoted as gross figures. Gross rental yield can vary from as little as 3% right up to 15% or more of the property value. You should ensure that the return you will get on your property is satisfactory otherwise investing may not be worth the hassle. Whilst capital growth can be achieved, I think buy to let should be regarded as a medium to long term investment. The net yield is calculated using the amount left after purchase fees, repairs, void periods, mortgage repayments, management fees and other running costs have been taken into account. Net yields can be substantially lower than gross yields, so make sure that you are comfortable with the return. If you are targeting a property that will rise substantially in capital value, a lower yield may be acceptable, as it may mean there is more scope for a rise in property value. Some agents will quote projected net yields at around 75% of gross yields. This seems a little optimistic to me and I would urge you to be prudent. In my experience, it is much more likely that your net yield will work out to be a lower figure, often dependent, of course, on   your borrowing situation. This is why I always apply a minimum target for a gross yield on any property I am considering buying to let. Some other rules of thumb that I apply include: Generally I believe that lower priced property will provide a better annual return. However, expensive properties in prime areas if providing a lower return may be more likely to appreciate more in value. ARLA recommends that you should look for rental income that equates to approximately 130 - 150% of any mortgage repayments. This will allow you to cover the inevitable void periods after period of occupancy, as well as maintenance, repairs, insurance, redecoration etc. Finally, in the words of the Council for Mortgage Lenders, "potential landlords must always think about whether their investment expectations are realistic". The best way to find out whether they are or not is to speak to a letting agent and that is why Rob and the team at Lenwell are invaluable in both advising me on acquisitions and disposals and also on managing my properties proactively in order to mitigate expenditure and avoid any void periods. Buy to let investing is not for everyone but can be very rewarding and I wish you well with any plans you have. Come on Malcolm, walkies!
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