Our Buy to Let Property number 2
Property 2 was purchased in April 2007, just before the UK housing market peaked. It was purchased using funds raised on the equity of our home and cost £76,601 when purchased.
This is a 2 bedroom flat. We thought it would appeal to couples with young children. With hindsight it would have been better to stick to cheaper 1 bedroom flats which easily rent to single people and young couples.
The previous owner had occupied it for several years and left a cooker, microwave, fridge and washing machine. The following pictures are from the seller’s property schedule and show what the flat was before we purchased it.
The Living Room
When the seller moved out, all the furniture was removed and we were left with bright orange / red carpet and the cream coloured blinds. We decorated throughout using the same magnolia emulsion we use in all our flats – using standard colours cuts costs and make touching up paintwork between occupancies a lot easier.
We decided to keep the carpet, it wasn’t to our taste, but it wasn’t worn, so replacing it would of been a needless expense. It’s likely to need replacing in a few years time.
The living room was completed by the additional of a leather 3 seater and 2 seatersofa. This was a bargain, a friend of ours had bought a new suite and asked if we wanted it, all we had to do was to arrange the uplift andthis is where a friend with a van comes in very handy (A big thank you to Graham).
The living room was completed with an Ikeacoffee table, a corner TV stand (we don’t provide TVs in our rental properties), a fold away dining table and chairs and some pictures.
The kitchen just needed a clean and a lick of paint. If we were going to live in this property, or were getting it ready for resale, we would of fitted a new kitchen. The existing kitchen was in good condition and should still provide many years of service.
The previous owner had left all the white goods including a tumble dryer which is under the breakfast bar. This saved us a lot of initial expense. The washing machine lasted approx 18 months before it broke and we had it replaced.
One essential we added to the kitchen was a fire blanket. These can be obtained at little cost from Amazon, see :
The previous owner had recently replaced and tiled the bathroom. Whilst the scalloped suite wasn’t to our taste, just a good clean and a new shower curtain was required.
Bedroom 1 – the master bedroom
The main bedroom was a good size, with a built in wardrobe (this saves the cost of having to by a wardrobe) and also 2 other storage cupboards.
The terracotta paint work was a throw back to the 80’s and was quickly replaced by the standard Wickes Magnolia Emulsion.
We bought a new double pine bed (later to be found to be a bad purchase since it didn’t live up to the wear and tear of tennant use). We also changed to origination of the room, placing the bed where the chest of drawers are in these pictures to improve the layout and flow of the room.
We also installed two pine bedside cabinets and a chest of drawers we used to have in our own bedroom. Don’t be afraid to recycle your own furniture in to your rental properties. We had kept these items in the loft at our home for 2 years, “just in case” we needed them.
The 2nd, smaller bedroom was used by the original owners as a nursery and computer room. We redecorated in our normal magnolia colour scheme.
We fitted a 3/4 (Small Double) bed so it could appeal to tenants with children as well as tenants where two adults might be sharing sharing the property. This bed was placed under the window. Once again, this was a bed we had previously used in the guest bedroom of one of our previous homes, but had been put in to storage by us when we started our family. Similar beds are available as shown below:
The room was finished off by the addition of a small white Argos double wardrobe. In hindsight, the quality of this unit wasn’t good and drawers and handles have had to be fixed on a number of occasions.
Since this was a 2 bedroom property,it had a separate hall way. Not much wrong apart from the yellow paint. Good old Magnolia Emulsion to the rescue!
How much money have we made our Buy to Let property 2?
In November 2011, it is worth in the region of £65,000, so if we had to sell now, we are looking at negative equity of just over £11k. However our property portfolio has two main aims:
- It is a long term investment. We expect the property to increase in capital value over 20 to 25 years, so a small drop in value over 4 years isn’t a problem as long as we don’t have to sell in the short term.
- The annual rental should cover the annual costs. Effectively the tenant’s rent is paying the the purchase cost of the property.
Compared to our first 1 bedroom property, this 2 bedroom property hasn’t been so easy to rent. We expected it to be rented by couples with young children, or friends who have decided they want to flat share.
However property 2 tends to be rented by couples with no children who don’t need a 2nd room and would be better placed renting a less expensive one bedroom, or by two tenants who barely know each other, who have ended up renting together because they can’t afford to rent their own property.
Property 1 has very short (void) periods when we don’t have a tenant, whereas property 2 has been empty 4 to 8 weeks on several occasions between lets. Due to the shared rental and lack of individual responsibility,the remedial work required between lets on this property is also higher the the 1 bedroom property.
Location, Location, Location is definitely true. Property 1 rents out within a few days of a To Let sign being displayed and has no void periods, where as property 2 requires To Let boards and letting agents to promote the rental.
How much is the monthly rental on our Buy to Let property 2?
Property 2 originally rented out for £425 a month in 2007. However after the initial 6 months tenancy, it sat empty for several weeks, so we dropped the rental to £400 a month and quickly found a tenant.
You need to remember that if you try and charge £425 a month and it takes two months to get a new tenant, it would take 34 months to recoup the lost rental income compared to renting it out on day 1 for £400 a month.
Over the years the rental has increased and as of Nov 2011, it is either £425 or £450 a month.
I guess the reason I don’t know the exact current rental figure reflects that this is now a passive income stream. I normally look at the figures once a year when I do my tax return.