Getting and keeping a tenant,
The one thing I have learned from properties that I have owned is that it doesn't matter how good the deal is, unless you can get a guaranteed tenant it will soon turn into a very painful financial decision.
That's why the second of my two laws of buy to let property is buy something that is tenantable. I wasn't even sure that ‘tenantable' was a word until I looked it up in the dictionary. Nonetheless it is perhaps one of the most important words in property investing. When people mention ‘Location, Location, Location' in buy to let properties what they are saying is tenantable. I summarise it very simply: good solid fundamentals, meaning shops, schools, transport links, major employers and major investment. If your property has these you are more likely to find a tenant. Being able to consistently find a tenant for your investment property regardless of how long you own the property for. It's never just good enough to find a tenant once.
In order to ‘Set and Forget' a property you need to find a tenant quickly (and I believe in the UK it should be within 6 weeks every time.) The great thing about 6 weeks is that normally your tenant will give you 4 weeks notice so you won't be paying for this, leaving you only 2 weeks. In my own portfolio and the portfolios of hundreds of our clients we have proven this consistently.
How to guarantee a property is tenantable all of the time…
Besides good solid fundamentals one of the key elements to successfully letting a property out is through looking at the mass market in each area and buying properties they would live in. I call this the “everyperson” house.
Imagine a bell curve diagram:
Now imagine that the poor live in houses at one end and rich people live in houses at the other. The Everyperson lives in the middle and makes up by far the biggest proportion of the market.
Now I never buy where poor people live
They tend not to pay the rent, they wreck the property, the don't treat it like a home and you end up with void periods or added costs in repairs. This is totally against my Set and Forget philosophy. Now I am not going to get into a political argument about the poor, remember I am an investor and as such expect a return on my investment, if I was a charity they I might think otherwise.
A great case in point is that Simon and I attended a Landlords Association course. The morning was spent telling stories of horrific things happening to landlords. The common thread was that every property without question was either a HMO (House for Multiple Occupancy) or a cheap property under about £120K. Not one instance was the property in the everyperson category.
In the UK we have been associated with almost 2000 property sales and so far we only have three instances of tenants from hell. Sure we have had people miss payments and leave damage but in all cases they have fixed up the problem or the deposit has covered the damage.
Now I also don't buy where rich people live
When times are good everything is fine but when times are tough they tend to go and live with the everyperson, if this happens I end up left with void periods. Again this is against my Set and Forget Investment Philosophy.
Obviously the everyperson house will change between areas. London city centre would be a 1 or 2 bedroom apartment valued between £200,000 and £350,000 and Newcastle would be a 3 bed terraced house outside the centre worth between £75,000 & £200,000.
What I am saying is this; buy a house that will have the biggest and broadest demand. Stay away from huge mansions or low valued properties but always always buy with good solid fundamentals, the shops, the schools and the transport links.
Always think I'll buy this, but who will rent it? Now and in the many years to come!
Live with passion,