Do you know what the biggest costs are for property investors? Are you aware of how this could affect your bottom line? For the next few weeks we’ll be focusing on these and other challenges investors like yourself face at the moment.
Sarah Luscombe, Director of Luscombe & Co has been a property investor for over almost two decades and she knows the Newport property market like the back of her hand. She loves to share her knowledge with fellow landlords:
I want to tell you about the costs you might not be aware of and also shine the light on the biggest cost to any property investor.
Property typically grows over the long-term. But that shouldn’t be the reason for your investment in property; you’re investing in a rental property for the income! The growth is just a bonus. So when you’re choosing your next property investment, make sure you select a property with a good monthly income.
You have to keep in mind that you’ll need the rent to cover things like your mortgage interest, taxes and insurance. Your rent needs to cover management expense on the property itself, maintenance and routine repairs (which is £700 per year on average).
So you’ll need to have a solid income even after all those expenses.
The biggest cost you might not be aware of is VOID PERIODS. One month’s void could cost you around £850-900! Now you’re probably wondering how. When there isn’t someone living in your property, before another tenant moves in, you need to carry out repairs, clean the property and so on. Add to that the average rent of £500 you’re losing in rental income and it comes up to a hefty sum.
So how do you avoid this? Many landlords push up their rent in a desperate move to cover all their costs. Let’s say you’re renting out your property for £450 at the moment and you want to put it with £50 yearly. There’s a big chance you might end up losing your tenant.
Now if you put the cost of void periods against the minimal income you might gain, does it really make sense?
I have properties with tenants that have lived there for 15 YEARS! So how do I do that? I don’t put up the rent very much each year. I’d rather have a long term tenant that looks after my property.
I also allow my tenants to decorate the property themselves. Research found that tenants who could decorate and customise a property to suit their needs were willing to pay up to £72 more per month!
Some 43 per cent say they would stay longer in a property if it could become ‘theirs’ through personal decorations, and 44 per cent say they would be likely to take greater care of the property.
If you need any advise on your property and the costs involved, feel free to give us a call on 01633265222
All the best!
P.S: Secret tip that I’ve been using for years: When you decide on the rental price of your property, advertise it just below that. You’re more likely to get tenants faster and avoid those costly void periods.