21st June 2024

Investing for capital growth is just gambling, but investing for income is future-proofing

In chapter 5 of my book, I discuss tenants. I cover all the basics you need to be able to deal with tenants. More people than ever before are expecting to rent, and that means that it’s very easy to find tenants and not have voids. In relation to my buy/refurbish/refinance strategy, I show that there is a difference between investing for capital growth and investing for cash flow. I believe investing for capital growth is just gambling, because you don’t know when or even if that growth will happen. When you invest for cash flow you get an immediate gain and when the capital growth occurs you can leverage that as well. I also talk about the all important issue of getting tenants out. It’s not that hard when you know how to set things up in the first place. Things can be easier when you use agents but,  it’s up to you to check that they are good professional agents who are members of a trade association that guarantees their standards, and you should check that they have client accounts to protect the deposits. Lastly, I encourage my readers to get a strategy together for void periods so that they don’t last too long.
My top tips
1.     Yield (the formula for a rough calculation of gross yield) is rent multiplied by 12, divided by purchase price, multiplied by 100. You should be looking for a result of 8.5% or higher to be certain that you will make money each month.
2.     Make sure you know all costs of running your investments so that you know if you are making a profit.
3.     Investing for capital growth is just gambling but investing for income is future-proofing.
4.     NEVER, EVER hand over your keys to potential tenants until you have: ·  A signed tenancy agreement ·  The deposit ·  The first month’s rent
5.     Warning! When advertising a vacancy you must: explain any charges or fees attached to applying for the tenancy and you must have an EPC (Energy Performance Certificate).
6.     The law also requires you to hold a gas safety certificate and it must be renewed every year.
7.     Choose tenants carefully; be confident that there are plenty out there. Best tenants are: blue collar workers, working families and young professionals.
8.     It’s easy to vet tenants; just get their address details for the past three years and hand over to a vetting agency and wait for the results. The best tenants to accept are the people who turn up on time, dress tidily and can prove regular work. It’s okay to ask to see recent bank accounts.
9.     Don’t accept cash for bypassing the application process and don’t allow tenants to move furniture or any other possessions in before the start date of the tenancy agreement.
10.  When your property falls empty have a strategy for turning it around quickly.

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