Buy To Let - House or Flat - Which is Best?
If you're considering buying a buy to let property investment, then what's it best to buy - a house or a flat?
Let's look at the pros and cons of both ideas...
Buy to Let Flats/Apartments
It's been my experience in the buy to let business that property size is hugely important when it comes to finding tenants. In general the rule is...
The smaller the property, the easier it is to let out.
There is phenomenal demand for small single household rental accommodation, particularly in the South East and South West of England. I once lived in Exeter, Devon (a great BTL location!) and it took me weeks to find a one bedroom flat for rent. Letting agencies usually have a waiting list for tenants interested in small properties, so as a result they don't always need to advertise these small properties on sites like RightMove, or even in their own shop windows.
I own a small 2 bed apartment and I've rented it out since 2006. In that time I've had around 3 months of void period. Actually two of those months occurred during the crash of 2008 (bad timing to lose a tenant in October 2008!!!). I also had more void period than expected during that time because my letting agent took the crazy decision to stop doing viewings at weekends (they went bust shortly afterwards!).
Another good thing about apartments and flats is that they tend to be leasehold. This means somebody else is responsible for repairing the shared parts of the property (e.g. roof, external walls). Before you buy a leasehold property check how much the monthly service charges are though. My own property in Essex is well managed and I pay around £70 a month. But the landlord of the place I rent in South London pays £250 a month for their property maintainence on their leasehold apartment!
In general you'll find that lifts (elevators) are expensive to maintain and can add a lot to the service charge. So don't moan about the number of stairs you have to climb!
Newer build apartment complexes tend to have much higher service charges which are inflated by additional charges for use of shared swimming pools, gyms, consierge services and other things. So be wary of these types of property, as many tenants won't use these facilities anyway.
If you're going to pay extra for one thing, then make sure it's a parking space!
Buy to Let Houses
I've not had a great deal of interest in buying houses for rental investment. For me the issues with houses are:
- They're almost always freehold rather than leasehold, so you're responsible for the upkeep of the walls, roof, garden and other parts of the property.
- There's more to maintain in a house (e.g. stairs) and you don't tend to make that much more in rent compared to a similarly sized flat.
- It generally takes longer to let out a house. Larger properties attract fewer potential tenants, so it's just a numbers game really.
If you're considering buying a house to rent out then one vital tip I'll give you is make sure it comes with parking. Most tenants have to work in order to secure a tenancy, and unless your property is next door to a railway station or bus stop then they'll often want to drive to work. I once lived in a lovely 2 bedroom terraced house in Colchester. The landlord found it really hard to rent out though and this was almost entirely due to the fact that the house was on a main road and had no parking space. As a result it took a couple of months to find a new tenant once somebody had decided to move out. Another thing about car owners - they feel comfortable if they can actually see their vehicle from their home.
So it can be harder to find tenants for a house compared to a flat, but don't tenants renting houses tend to stay longer?
It's been my experience that this isn't necessarily the case. Houses appeal to professionals with families and they're increasingly likely to need to relocate to a different part of the country because of their jobs. So there's no guarantee they'll want to stay in your property for an extended period of time.
By comparison, my rental flat's current tenants have been in there for three years now, and I've had another couple who lived in it for a total of four years.
On a long enough timeline, the prices of houses would easily outstrip those of flats. Flats also tend to lose disproportionally more value during a housing crash. But the good news is that if you're patient enough then you can buy up both types of property at good prices during downturns.
Another good thing about houses is that it's more likely you'll be able to find a house in need of modernisation, which is a great way to make money from property. However, there are a lot more aspiring property developers around these days, so properties with good potential for doing up are hard to come by.
So here are some of the pros and cons of different types of residental property. As always, do your own research before investing in either type of property.