March 8, 2013

Bob Young is managing director of CHL Mortgages





Given the current strong performance of the buy-to-let market, it’s no surprise that there are a number of outsiders wanting in. This was evidenced by the first question from the floor at a conference I attended recently: “Is now a good time to buy an investment property and become a landlord?”


Although meant with the best intentions, I can’t help but squirm every time I hear this question posed for the very reason that, if you have to ask, you’re probably not suited to the role.


Sanctimony aside, there is never a bad time to buy if the chips are stacked in your favour and the same can be said of first-time buyers.


As a nation we have become so obsessed with property prices and capital appreciation that home buyers almost overlook the fact that if they need somewhere to live and can afford it then obviously purchasing is worthwhile.


Similarly, if property investors have done their research and everything adds up – the location is right, the property itself is right, tenant demand is sufficient, the rental value is set correctly and a long-term outlook is being taken – then it will always be the right time to buy, regardless of the sector’s performance or the wider economic prospects.


The fact that interest rates are low should be seen as an additional bonus to the aforementioned fundamentals rather than a deal breaker in their own right.


Another rudiment that is seemingly overlooked by those agog at the prospect of short-term gain is the importance of attracting the right quality of tenant.


It’s all very well filling the property initially, but if the tenant turns out to be unreliable then this not only impacts on the mortgage payments (not to mention yields), but it also means that the landlord has to go through the whole rigmarole of finding a replacement.


One last thing that some property prospectors overlook is the importance of maintenance.


Identifying a suitable and profitable property up front is only half the battle – it must also be kept in a condition that will continue to attract new tenants and justify the rental payments.


I’ve seen too many properties (mostly accounted for by first-time renters who are used to having parents clean-up for them) fall into what I would term a vicious circle of decline.


Coupled with landlords who don’t take an interest in keeping properties maintained, flats and houses become shabby and at the end of the term, quality tenants are no longer interested and so the cycle continues downwards.


If property investors let this pattern continue unchecked, then they are inviting trouble and only have themselves to blame when they can no longer attract the calibre of tenant they are seeking.


It’s not just a one-way street either.


Landlords aren’t the only ones who suffer if tenants fall into arrears, leave bills unpaid or damage properties.


What some undesirable tenants fail to realise is that their own behaviour jeopardises their own chances of securing future tenancies.


With so much pent-up rental demand, property investors can afford to be fussy and hold out for someone with glowing references rather than someone who rubbed their previous landlord up the wrong way.


We live in a society characterised by compensation culture where people are happy for others to take the blame, but it is important that tenants take responsibility for their actions and fulfil their end of the rental bargain.     





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