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Legal and financial aspects to buy to let services



Financial services:
 
- Economics of Buy to let
- Market appraisal and demand
- Tenant supply
- Financial considerations
- Planning 'Gain' and Development
- Mortgages
- Insurance
- Legal

Tenant Supply

The number of potential tenants in the locality of the property being considered by the investor should clearly be considered carefully. The current and potential supply can change and some examples Buy2LetExpert would highlight are:

  • University expansion. The expansion of a university or college can have a marked impact on potential tenant supply even if the potential tenant is not a student. This is because the 'new' students may move into nearby properties. Consequently the supply of non students will be chasing fewer properties.
     
  • Immigration. Like with student expansion, this should not be dismissed just because the Buy2LetExpert target tenant will not be a recent immigrant to the area. Any growth in the recent immigrant population will have a knock on effect to most segments of tenant demand in the same locality.
     
  • Seasonality. An area with a large student population is likely to experience peaks and troughs of tenant supply. Many will be looking in August and very few in July. The ideal for an investor is to have strong supply year round. Of course this is impossible but huge troughs in supply should be recognised as an issue and contracts should 'steer around' such troughs. See also our section: renewal management.
     
  • House prices. The economists would argue there is an inverse relationship between house prices and rents. In theory when people are buying they are not renting and vice versa. So, rents should fall when prices are rising and rise when house prices are falling. Buy2LetExpert have never found this relationship to work so well. In fact when rents rise they tend to leap in jumps before becoming stable for a year or two. However, over the longer term, stable or falling house prices make the case for renting for a year or two look quite compelling. Also, clearly, if house prices rise outside people’s reach then they will rent for longer periods.
     
  • Mortgage lending. Mortgage lending has recently fallen as lending criteria became more strict and larger cash deposits were required. This has occurred since the credit crunch and is driving increased tenant supply in London.
     
  • Interest rates. High interest rates (or perception thereof) will dampen mortgage demand usually and again may increase tenant supply as potential purchasers delay their decision to purchase.

 

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Legal side to property investment

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