Doing the Maths means looking at the:

• purchase cost
• deposit required
• monthly mortgage payments
• routine maintenance costs
• unexpected repair costs
• expected monthly rental income
• council tax and energy bills when the property is empty

Buying a property for the sole purpose of renting it out requires a totally different mind-set from that of buying a new home to live in. You need to think about your target market and what would be important to them, rather than buying a property which would suit your lifestyle. What is important to you may not be a high priority to your prospective tenant. For instance, public transport links may not be important to you if you have one or more vehicles, but it could be important to your prospective tenants. Students may not be concerned about parking, while young professionals may not want a large garden, so it is important to do your research on different areas and the type of tenant you will be target.

You should research the areas you are looking to buy in. Look for planned developments, both residential and industrial. If there is a possible expansion of businesses into the area, that may mean more jobs, which can only stimulate the property market in that area. Conversely, look for recent or planned business closures in the area, which may have an adverse effect on the local property market.

Have a look at the websites of local letting agents, this will give you an idea of the number of unlet properties that are in that area. If you are going to add to an already considerable number of such properties, it may not be the area for you. Use these same websites to look at the rent being asked for similar properties. Property rental, like any other market is affected by supply and demand and an area with high demand and low supply in the market would suggest that it could be a good area to invest in as rental potential will be higher.

Maybe you are looking at renting a property you already own, or a house you have inherited from relatives. Perhaps a flat you bought for your son or daughter when they moved away to start university and is now surplus to that requirement as they have graduated and are now in full time employment. In these cases, the same guidelines apply. You need to look at where the property is and decide what kind of tenant would most likely want to rent that property.

Either way, if you are looking at a house, you may need to target a more mature audience who may want to look at distance to schools, supermarkets, shops and local amenities. For students renting a flat, being near their university may be important with easy access to public transport and proximity to entertainment venues among their priorities.

It is also important when buying a property to rent, not to be swayed by your own personal preferences. You may like a large garden with a vegetable patch or prefer a bath to a shower but always remember, personal means personal to you, a prospective tenant may not be impressed by your preferences, so try to go middle of the road. Likewise when furnishing and decorating the property, try to keep away from bold, ‘statement’ décor or furniture. Pale, soft colours will attract a wider appeal and will also give the impression of light in a property.

Think carefully about electrical appliances, while it may give a more furnished appearance to a prospective tenant to have an array of lamps and kitchen appliances dotted around the property, topped off with a large screen television, these ‘portable appliances’ will all require to be PAT Tested by law, will need to be maintained regularly and ultimately replaced when they fail. Better to let the tenant provide their own appliances, making them their responsibility and to be fair, your taste in bedside lamps may not be theirs.

The other aspect of buying a property for renting is the financial side of things. Will the burden of being a landlord earn enough in rent to make the investment worthwhile?

To look at this, you need to consider:

• cost of purchasing the property;
• legal fees
• surveyors report
• monthly mortgage payments
• maintenance costs
• safety checks and certification
• management fees
• landlord insurance

With the exception of maintenance costs, all of the above can be accurately factored in, but maintenance costs are an unknown. There may be long periods where the property needs little or no maintenance, then without warning, the washing machine fails. That is going to cost upwards of £300 to replace.

All of these costs should be balanced against the potential income from the property rental. Potential, because a monthly rent of £500 per calendar month does not guarantee an annual income of £6000. This will only be attained if the property has a tenant for the full twelve months and that cannot be guaranteed. If a tenant leaves, it may be a few months before any maintenance work and redecoration can be carried out and a new tenant found and put in place. Also, remember that you will be responsible for the council tax and energy bills for any periods when the property has no tenant.

Having made the decision to enter the property rental market, it is worth considering how the manage the whole process:

• How do I find tenants?
• Where do I advertise my property?
• Can I get references?
• How do I do inventory checks?
• How do I manage maintenance?
• How do I collect rent?
• Do I give a tenant my contact details?

For someone who is a new landlord, all of the above and many other issues, may be extremely daunting, to others it may not appear to be problematic, but they are issues that must be addressed.

Many landlords self-manage their property while others choose to use letting agents to manage their properties. Self-management has no direct cost to the landlord but does mean that they are directly responsible for all aspects of the tenancy and this can be time consuming and not necessarily a good fit for an otherwise busy lifestyle.

Letting agents on the other hand, look after rented property on a day-to-day basis and will take care of all aspects of the rental as part of their service to landlords. They know many of the problems faced by landlords and for that matter, tenants, because they deal with them as a matter of course. This means that, in most instances, they also know the solution to these problems and are able to deal with them quickly and effectively.

Most agents offer a two tier service whereby they will offer a tenant finding service or a full management service. The tenant finding service normally covers marketing the property, viewing with prospective tenants, taking up references and providing a rental contract to be signed by both tenant and landlord. The full management service will normally cover all aspects of the tenancy, including the taking and keeping of a tenant’s deposit against any damage or loss, until that tenant leaves, all outgoing checks are completed and the appropriate sum is returned.

If you are considering becoming a landlord for the first time, get advice. Talk to others you may know who are renting out a property and have conversations with local letting agents. All of this advice should help you to make your final decision - the right one for you.

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