More landlords buying tenanted properties
13th February 2012 - Investors in the buy to let market
are increasingly targeting properties that have existing tenants
with a two or three-year rental agreement.
Research carried out by London letting agency ludlowthompson has
found that many landlords are tempted by the simplicity of buying a
tenanted property.
“Traditionally, most landlords prefer to buy properties with
vacant possession so they can make improvements before letting it
for the highest rent possible,” said Stephen Ludlow, Director at
ludlowthompson.
“However, a growing minority are attracted to the hassle free
alternative: buying a tenanted buy to let property which generates
income from day one.”
Some of the benefits that come with buying a tenanted property
include taking on tenants with a proven track record of rent
payments, and no void period when the property is empty. Also, many
landlords are tempted by the fact that there are no regulatory
burdens (such as gas checks) in most tenanted properties.
And in many cases the initial outlay of capital is much lower
than in empty properties because existing tenants are unlikely to
ask for major improvement works.
“These factors mean that the gap between a property’s gross
yield and the net yield that the landlord will pocket is often much
lower than with vacant buy to let investments,” added Mr
Ludlow.
“Tenanted properties can generate high net yields because they
produce rental income from day one.”
The research found that buy to let investors with tenanted
properties tend to target a gross yield of at least 7%.
“It is also quite unusual for established tenants to ask for
expensive improvements to the property, because they will normally
have been dealt with before they moved in,” said Mr Ludlow.
Amateur and professional landlords should take out landlords insurance, to ensure they are protected
in the event of damage to one of their properties or rent
arrears.
