One of the most crucial elements of your buy to let property is the rental income. Not only can it cover your costs including your mortgage repayments, but it can also provide a source of income and the ability to scale your portfolio.
At present, the UK average void period at the start of your investment is 20 days (Goodlord’s rental index). That’s why it may be worth exploring two options – choosing a property with tenants and choosing a new, pre-tenanted property.
A property with a tenant in-situ
According to recent research by Howsy, less than 1% of properties currently listed for sale across the UK have a tenant in situ, so they are a rare find. However, if you do manage to find the right one it can be extremely beneficial. By choosing a property that already has a tenant who is in a rental contract enables you to have immediate rental history which means you can better predict the return on your investment in the future. In addition, it means that the property will already have furnishings with no extras to pay for. Make sure you check how long the tenant has been paying the rent but also how long it has been since it was increased. With the current COVID situation you may choose to keep the rental fee the same depending on your tenants circumstances, but it will indicate whether they are paying the current market rate. If they are a good tenant and you want to keep them, it may be worth fixing the rent for a period of time.
Remember a good tenant is worth its weight in gold – you’ll have regular income, paid on time and a property that is well taken care of.
This means that the property is newly built and the developer or agent has already agreed on the tenancies ahead of completion. Although a new property won’t have a rental track record, you can still do your due diligence to find out what the rental income will be and can predict how well it’s likely to perform.
One of the benefits of a pre tenanted property is that you have control over the rental income you will earn from the off. As a new property, the agents responsible for agreeing on pre-rentals will have marketed the property at the full market rate, so from the very start you should be able to make a great return.
If you want to avoid the initial void period, or want to guarantee a good tenant, buying with a tenant in place can prove to be a viable solution.