Timing

The old cliche that timing is everything couldn’t be more true with property investment. Housing markets tend to work in cycles, so while investing at the peak of a boom might not get you the best returns in the short term, over time you are still likely to see your investment rise. Getting in when prices are at a lower point, or just as things are beginning to rise, is often the preferred strategy. Keeping an eye on house prices in an area can be helpful, with some locations performing more strongly than others at different times. The length of your investment matters – property is normally a long-term commitment, rather than a way to make fast money, so investors should be prepared to see their gains grow over time.

Location

Choosing the right place to invest is vital, but is also a decision that will vary from investor to investor. Emerging markets are a good place to start, which could include areas that are about to receive or have recently benefited from local investment, or parts of the country that have been relatively undiscovered until recently. While London was once the go-to property investment location, this has been overtaken by parts of the north-west including Liverpool and Midlands where rental yields as well as capital appreciation are much stronger. Investing close to where you live, in an area you are familiar with, might seem appealing, but researching and considering other areas can prove more beneficial in the long run.

People

Who you work with can have a big effect on the outcome of your investment, so doing your own thorough due diligence is vital before making a big commitment. For example, working with property developers and contractors who have a good track record should mean that you can be confident your investment will pay off. You should also look into how each company works, to make sure that it fits in with your own investment strategy. For example, will you be buying a tenanted property with assured rental yields, or would you prefer a more hands-on approach where you manage the property yourself?

Management fees

Many landlords pay a letting agency or management company to run their rental property for them, which is normally charged as a percentage of the rental income. Their services will include finding tenants, carrying out reference checks, taking a deposit, organising contracts and dealing with ongoing tenant queries and issues, as well as contract renewal. This cost can be avoided if landlords wish to self-manage. Landlords who choose to manage their own properties must be completely up-to-date on the latest regulations and legislation. Some landlords simply will not be able to keep up with the management without using an agent, such as those with multiple properties and those who live too far away to provide an adequate service.

Service charge

Many flats and apartments with communal facilities will be subject to a service charge. This normally pays for things like maintenance and repairs of communal areas and gardens, servicing lifts, and upkeep of communal heating and lighting. When you buy a leasehold property, you should be made aware of these charges and will be liable to pay them as soon as ownership is transferred. For properties that are subsequently let out, it is up to the landlord whether to pass this charge on as an additional cost to the tenant, in which case it must be set out in the tenancy agreement. Otherwise, you might recoup the costs by including it in the rent charged.

Council tax

Council tax is charged on every residential property in the UK (with some exceptions and discounts). The cost will depend on the valuation band of your home, what the local council charges for that band, and whether you are entitled to a discount. When a property is tenanted, it is up to the tenants to cover the cost of the council tax, but the bill must be paid by the property owner for rental properties that are not tenanted. Some local councils offer a discount if the property is a second home or is empty, but owners must check with their local authority if this applies to them.

Void periods

A void period is when a tenant moves out, and no immediate replacement moves in, meaning that all property costs must be covered by the owner until a new tenant is found. When selling a rental home, properties that already house tenants can either be sold with vacant possession on completion, or sold subject to an ongoing tenancy, in which case the tenancy will be handed over to the new owner on the day they get the keys.

This avoids void periods for the new owner, which can be costly and are something every property investor must consider when factoring in their risk and returns.

How are the rules changing?

At present, anyone who owns a rental property must protect tenants from the risk of electric shock, or fires from electrical items. This involves checking and maintaining electrical installations – such as sockets or light fittings – over the course of a tenancy to ensure they are safe.

Where a property is furnished or part-furnished and this includes appliances, such as a toaster or TV, appliances must have at least the CE marking to show that it meets all the requirements of European law. For houses in multi occupation (HMOs), inspections must be carried out every five years by a registered electrician, but this is not currently required for a non-HMO property.

Under the up-coming regulations, from July 2020 all new or renewed private tenancies in England will need to have all electrical installations inspected and tested by a qualified person before the start of the tenancy. They must then be inspected and tested a minimum of every five years after that, unless the safety report requires it to be done more often.

Tenancies that are already in place or ongoing will have the same rules applied to them from 1 April 2021, so they have slightly more leeway. After this point, the same rules will apply to all private tenancies in England, including HMOs.

What do landlords need to do?

Landlords who take on new tenants after 1st July must employ a qualified person to test all electrical fixtures and fittings prior to the new contract. They must obtain a written report of the findings, which they supply to the tenant before they occupy the property, as well as to any new tenants who request one after this point.

For existing tenants if a tenancy is being renewed after this date, landlords must supply a copy of the findings within 28 days of the inspection being carried out. They must also keep a copy for their records, and in case the local authority requests to see one.

If any faults are found, landlords must ensure any repairs are carried out as soon as possible, but at least within 28 days of the inspection – and this must be done by a qualified person, too. Once all electrical fixtures and fittings are compliant, the report can then be issued to existing or future tenants.