Buying a property, renovating it and renting it out at maximum market value is a skill that you learn through mistakes. If through my own experiences, I can help you to avoid some of them, then it may be worth you reading on.
The Ladder
Right then, you’ve finally scraped together enough of your hard-earned cash for a deposit on your first rental property. It will probably have been bloody hard work getting to this point and you will undoubtedly have had many other more pressing things to spend that money on, but you did it. Your children still need new shoes, and your partner has had to make do with painting the doors on the kitchen units rather than get a new one, but you managed to stand your ground and resist.
You’ve kept those funds in the bank for the purpose for which they were intended. Most investors would agree that buying the first rental property is the hardest. You’ve jumped the main hurdle, broken the seal on property investment and now, you’re ready to join the ranks of Robbie Fowler and the Duke of Westminster.
Time to crack out the champagne? Not yet, you have a lot of work to do. First, you have to find and purchase the property. Undoubtedly, you’ll have done your research, and you know you’re getting a good investment property that will return a respectable yield in an area where competition is low. You’ve done your homework and established exactly what needs doing to it and what it will cost to make it not just rentable, but highly desirable.
Get prepared
Before you do that though, how will you buy the property? In your personal name, or via a limited company? You will need tax advice to work out the best way, so you’ll need a decent accountant who understands property. Have you set up the correct limited company SIC (Standard Industrial Classification) code for letting property? How about a credible business plan that makes sense? Mortgage companies will want to be comfortable you can service the mortgage payment whatever happens. Have you set up a bank account and deposited funds into it? Your conveyancer will want to see evidence that funds have been in the account for some time and from where they originated. These are all very important questions to answer and execute before you find the house-hunting starts.
Once you have found the perfect property and your offer is accepted, applying for a mortgage is the next step. Finding a mortgage broker you can trust to do the job properly is paramount to getting your new venture off the ground successfully. Ask about the fees they charge and what they know about buy to let mortgages. Better still, get a recommendation from a friend who is not being paid to pass your details over. I would personally only choose a broker that invests in property themselves. Talking the talk is one thing, walking the walk is quite another.
About three months after your offer was accepted, the transaction will complete, your solicitor will call with the good news, and you can head to the estate agent’s office to pick up the keys. If the excitement building up to this moment is about as much as you can take, then getting those precious keys in your hand is like losing your virginity all over again.
Top tip: Vendors love to leave their unwanted junk behind for you to dispose of. It costs time and money to sort out. Go to the property a few days before completion and assess if this is likely to happen. Then, make sure your solicitor communicates with the other party to let them know you won’t stand for it. You want a clear house. That means empty. Very, very empty, like a lost soul in a dark storm empty. Make it clear that anything left over will be cleared by a professional and charged back to them. Mention £200, it always works.
Making a rental property presentable for the first time is fun, but some upfront planning will ensure you don’t waste too much precious time. The mortgage starting gun has fired, the clock is ticking and you’re under the cosh for interest payments right now. The faster you get a good tenant in there paying top dollar, the better.
For me, working in tandem with my solicitor prior to completion is very important. I want to know how exactly when the transaction is going to complete with around three weeks’ notice. I don’t mind if it takes an extra week or even two, as long as I have that solid date to work with. The reason for this is that I can line up my team of tradespeople in good time. For a tradesperson there is nothing worse than a client who doesn’t plan and then frets on the phone, needing things done tomorrow. Plenty of notice will not only demonstrate your professionalism but will also guarantee you get the work done when you want it done. Builders are hardly short of work. The benefits of building strong bonds through trust, intelligence and fair payment can’t be underestimated here.
Keys are the key
Arrange a meeting with all your trades on the first day of ownership. Head to Timpsons and get 6 keys cut. Buy a pack of 100 key labels from Amazon (nothing like dreaming big) and write a simple code name for the address on each one attached to a freshly cut key. E.g. 8 Temple Road, shorten to 8TR. You don’t want your plumber to drop a key displaying the full address and postcode at the builder’s merchants now do you?
Meet with each tradesperson individually and issue them with a labelled key, and make sure you check the key actually turns the lock. Copied keys are notorious for not working the first time, and you don’t want the tradesperson turning up to repaint and they can’t get access. It’s an avoidable waste of everyone’s time and will ultimately cost you money, time and possibly a relationship. Always keep the original keys for yourself and store them away in a safe. Don’t ever give them to anyone. If you’ve ever experienced the horror of completing a blurry photocopied form that’s been copied from a photocopied form, you’ll understand the importance of this. Eventually, you’ll end up having to change the locks and that costs money. Not acceptable.
At this point, my letting agent comes by to check out the property, takes a few simple photos and puts it on his Instagram page under ‘Coming soon’. It’s usually enough to create a list of pre-registered prospective viewers who will be chomping at the bit to get through the door as soon as the trades are leaving. Remember, there’s not a moment to lose.
Trades you will need:
Plumber, electrician, decorator, tiler, gardener, carpet fitter, window fitter, handyman, cleaner.
The quicker you build relationships with these trades, the faster you will make money. Choose them well, and don’t accept unreliability, lateness, lies or excuses. Builders are notorious for it, and you don’t need it. The good ones are worth their weight in gold and will need to be paid well. Haggling isn’t going to work. It’ll end up costing you more money by trying to find and haggle with others. You want the job done, and you want it done on time.
Similarly, doing the work yourself to save money isn’t generally cost-effective, unless you have the skills of Handy Andy. Carrying out all the individual jobs yourself will take you so long to get the job completed, you’ll be losing more in monthly interest payments than you would have spent contracting specialists to get the job done quickly. 2-4 weeks is acceptable. No more.
Pay your trades well and pay them as soon as the job is completed. They are tired of waiting for money from customers. It’s not rocket science to work out that they’ll move quickly next time, for someone that paid them on completion of works last time.
KISS
Organising trades isn’t that difficult when you have plenty of notice to give them. You’ll need a mobile phone and a clear idea of what you want to achieve. Don’t get starry-eyed on fixtures and fittings, there is no need. Installing Waterford chandeliers and a Smallbone kitchen is a total waste of time in a run-of-the-mill 2 or 3 bedroomed property. Keep It Simple Stupid (KISS), I always remind myself as I pick up an unnecessarily complicated tap, or a sexy copper light fitting. I put them back down and remind myself of what I’m trying to achieve – good quality, clean, affordable rental accommodation.
When you first walk in as the new owner, don’t be at all surprised that the property looks grubbier than when you initially viewed it. This is quite normal when the furniture is removed, and it makes little difference. You will almost always need to redecorate and re-carpet anyway.
The sequence
My plan of attack for each property can vary according to the availability of my trades and the amount of work to be done. But usually, I will get the plumbers and electricians in first, as they often need to cut around things to carry out their repairs. The consumer unit almost always gets changed in my properties, as well as sockets and ceiling roses. I make sure to install a wired interconnected smoke alarm system.
Why? Because it’s my belief that the batteries in smoke alarms are programmed to expire on a Saturday night when you’re in the pub on your third pint. That’s when you get the call from the tenant. To be avoided at all costs. I like to add simple and cost-effective touches like under-counter lighting in the kitchen and an illuminated bathroom mirror. Not only do they look good in professional photos, but they are also extremely practical for tenants.
The handyman comes next to make good anything that’s broken or out of line. Kitchen and bathroom doors and drawers always need realigning. It's these subtle differences that will add to your perfect finished look without having to install a new kitchen. I’ll bring in my window fitter/repairer, who normally only needs to repair time-damaged hinges and handles, rather than replace entire windows, and then my gardener to tidy up patios, lawns and hedges. He also realigns and repaints fences.
The home straight
Just when you feel like you’re not getting anywhere, the decorators whip out the rollers and bring together the anticipated look. That’s when the warm fuzzy feelings begin. My decorator and carpet-fitter communicate with each other, and the latter enters the property the day after the former leaves. Carpets are laid, bathroom, kitchen and conservatory linos are installed and hey presto, you’re 95% there.
Top tip: Use the same paint, carpets and linos in each property. You want your prospective tenants to walk into the property, smell the freshness and feel like nobody has ever lived there before them. I use grey carpets and white walls. It's modern, fresh and simple. Leave the remaining paint behind and remind the tenant that it’s their place to keep the place looking this good.
The final part completes the picture; a thorough clean of a newly renovated property isn’t that difficult to do yourself. By getting your hands dirty you’ll become familiar with every nook and cranny of the place, and most importantly will help you to identify the final snags like loose skirting boards or kitchen handles. As your portfolio grows it may get harder to clean houses yourself as tenants change and new properties come on board, you won’t have the time or attention to detail that a professional will have. Only at that point are you excused in my book.
Prior to photographs being taken, you can do a little to stage the property yourself. If you have a difficult property or you have lots of competition, you may consider using a staging company to temporarily furnish it. I always buy new doormats, a washing up bowl and drainer, hand soaps, loo brush and a few other items to give the property a touch of zest and suggestions of complete cleanliness. My agent will have taken professional photos, whipped up prospective tenants into a frenzy and booked a day of viewings at 15-minute intervals. I head to the property first and put room spray around it and fresh toilet-duck around the toilet bowl. It may seem over the top, but it appeals to the senses. It differentiates my properties from others and secures top of the market rent.
Going to these simple lengths will guarantee you several offers within a few hours of viewings. You may even find yourself in the midst of a bidding war where a couple of tenants fight it out between them. Simply smile, stand back and allow the best offer to win. You of course will be the real winner – and that’s when you know you’ve done the job right.
