Don’t buy wasted space that tenants don’t really want
DON’T BUY WASTED SPACE THAT TENANTS DON’T REALLY WANT
Buying superflous or wasted space is a waste of money in the business of buy to let.
When thinking of buying a property to let, one has to be careful to not buy space or features that are not going to be used or appreciated by a tenant.
So, the classic mistake is where someone buys a flat in a swanky new build “because it comes with a gym and / or a concierge and / or valet parking”.
This is always a waste of money – both of your capital and a huge drain by way of service charges too.
Most tenants will not use any of these things and even the ones that do, will not be prepared to pay much more in rent to access them.
They fall into the category of “nice to haves” that some home owners will pay a bit more for, but they just won’t wash is terms of value on the rental side – they will just clobber your net rental yield.
NO WASTED SPACE THAT TENANTS DON’T REALLY WANT IN THE TWO UP TWO DOWN
In many ways, this is why the old late Victorian terrace two bed house with two rooms upstairs and two down as well as a bit of garden, is a design classic and also good for renting.
None of the space in these properties is wasted. With limited capital to build, the builders of houses in these eras knew how to get the best bang for their bucks from cash strapped Victorian buyers and landlords, so they built accordingly.
And of course, it is still true today – this type of property always has a big market place, appealing to buyers and tenants who are singletons, couples, a couple with one older child or a couple with two very young children. A very wide market in other words of tenants – and when you come to sell, of buyers. .
And so that is why they often form a big part of landlords’ portfolios. They do in mine too. (Just make sure you don’t get one where the bathroom is off a bedroom. Why do people do this? It is a complete “No no” for many tenants and future buyers alike – and guaranteed to knock at least 8% off the value of their house when they come to sell!)
Of course, there are things that house buyers like and will pay for. Examples are a decent sized cellar that be used for storage or which can house a washing machine and a big freezer. Extra dining space is also good.
But we always find that tenants won’t pay enough extra in rent, even for these things. They like them yes – and having them will put you a bit ahead of other properties – but you will never recover the money spent buying this sort of extra space through equivalent increases in rents. Again, your rental yield will be lowered and your capital working less effectively.
So, when you come to buy to let, know your market – i.e. what your tenant market looks like. But don’t waste money buying what your tenants don’t really need and won’t pay you enough for.
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