Buy to Let Tips in 500 Words by LettingFocus.com

Someone asked me what my five very top tips for success in buy to let are and would I mind summarizing the main things to do / not do in fewer than 500 words. So here goes….

One - Always buy in the right area and the right type of property at a good (i.e. low) price and buy where tenant demand REALLY exists. And check tenant demand exists BEFORE you buy. In most places you should avoid new build flats as they seldom keep their value, especially the developments where most flats have been bought by other landlords and / or are on huge estates full of the same kind of identikit flats and / or where the arrangements to manage the land around the property and the structure are weak. Look out for and buy into areas that are REALLY getting regeneration money, new employment or better transport. Preferably, all three.

Two – Avoid all Get Rich Quick in Property exhortations and / or anyone who uses phrases like “financial freedom” or “no money down.” Be very wary of the types of lease options scheme where the tenant-cum buyer buys a lease from you to purchase a property from you in the future. We think they are at best unethical and we don’t think they will stand up to legal scrutiny in the future either. We also expect them to be banned just as soon as the FSA wakes up to them – which given their usual speed won't be for another three to five years at best.

The fact is you can get rich in property but it is not something you can do fast and if you cannot afford to invest without resorting to weird and strange financing / cash flow techniques then think hard about if you should not be in the property investing / landlord game at all.

Three – Don’t simply trust to a letting agent to do thorough reference checks on tenants for you. YOU need to make sure they have done the proper checks. If you skip this advice you will eventually get a tenant from hell. Trust me on this!

So, make clear to the agent what tenants you want and don’t want and ask to see all references and retain a veto if they aren’t good enough. Don’t pay over one months rent to an agent to find a tenant for you and NEVER pay renewal charges if all the agent does is find a tenant for you. Even better, find a tenant yourself for about £50. See our Services and Products for Landlords page.

Four – Be nice to tenants. Fix things fast, be available during working hours (within reason) and don’t be mean and sweat small pennies. Offer competitive rents to good tenants – i.e. one that’s a bit below the market average. Never forget, good tenants are worth getting and keeping! If you operate in “specialty sectors” like HMOS, students or “Benefit Tenants” you’ll need to do extra swotting up and make sure you know what you should be doing, stay within the law and get paid.

Five – As a landlord you have legal responsibilities - sorry but the days of Rigbsyesque “muddling through” are long gone. So, understand the law or risk getting fined. Have a good filing system and keep a sense of humour!

Lazy Journalism

It being the end of the tax year, I see the personal finance press was full of ISA stories at the weekend. But the best rate you can get on money tucked away for a year is actually from the National Savings and Investments (that’s the government) whose Index linked certificates are paying 1% above the RPI inflation rate. That means they are currently paying 4.7% and it is tax free. I have not seen a one year term ISA or a non ISA rate that beats that.

Too bad pretty well all the journalists that wrote about ISAs were copying from press releases from bank and building societies and were just too lazy to check out the NS&I rates.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I am a consultant to banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the broadcast media.

Services for Private Landlords

For private landlords and other investors in the private rented sector, we do just two London seminars each year.
We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one-to-one mentoring / coaching basis or through our occasional group seminars. With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

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Most Property Advice Not Covered by FSA says Letting Focus

I have just had a letter from the Life Insurance Company with whom I invested in a With Profits endowment policy many years ago.
If you are too young to remember them, these were the dumb opaque products that for years the financial press told us were so great.
The letter told me how badly my policy is doing and how it hasn’t a cat in hells chance of paying off my mortgage.
And there was all the usual incomprehensible guff about crystallised assets, “holding back money in good times”, orphan assets etc.
The trouble is with these endowments is that the whole thing is so opaque.
I did an MBA is Finance at a top business school and even I don’t get it …… With Profits?…."With Losses” more like.
So now, when I invest in things other than property I now do so direct.
I have an account with a stockbroker (nominee) and buy shares directly.
I avoid funds and their high management costs hidden in the Total Expense Ratio, though some investments trusts are OK to get foreign exposure (though there fees are still too high)

HIDDEN CHARGES
By buying investments direct, there are no silly / hidden charges and opaque pricing, no exorbitant management charges etc. And it allows me to build up a portfolio in shares to counterbalance my property holding.
Of course all these awful endowment things, precipice bonds and the like were all sold by salesman on big commissions from the insurance company.
But at last this nonsense and exploitation of the consumer is to be stopped.
About time too.
The fact is that the public has been exploited for years and it is great to hear that at last the regulatory authorities have finally decided to force change on what the Observer newspaper called “A series of archaic practices, where poorly qualified "experts" administer inappropriate advice to the unwitting and are paid billions in commission to sell potentially harmful products.”
Of course, the industry that flogs this rubbish wants to fight back and continue with the situation where 20,000 odd agents play at being independent financial advisers but with with low levels of relevant qualifications.
These guys are almost entirely remunerated by commission paid by the life industry to sell life products.
Let’s hope the Government has the bottle to continue with legislating on this.
The FSA's Retail Distribution review should mean that, from 2012, all independent and tied financial advisers will need much higher levels of professional qualifications and will be forced to act as an agent of their client and be paid appropriately and not via the murky and corrupting commission system but through transparent fees instead.
So, what's this got to do with property?

PROPERTY ADVICE AND THE FSA
Of course, most property investments remain outside the FSA remit, apart from Sale and Rent Back and a few other areas and thousands of people continue to be ripped off by dodgy property seminar firms and Get Rich Quick in Property schemes.
Avoid them like the plague.
To learn some sensible stuff come to our next property seminar where we dispense sensible independent advice.
And, the best bit?
No one will try to hard sell you anything.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlord experts. I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy my Property Letting Book.
What’s unique about LettingFocus is that I offer independent unbiased landlord advice seminars. These cover property investment and letting and they are unbiased because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas) and what type of property to buy and I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
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Find out about all the GREAT DEALS we have arranged at our Property Affiliate page.
Keep checking as more will be added over the next month.
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