At first glance the idea of having ready made tenants for a property may seem like an appealing idea, but sadly things aren’t always so simple. Some tenanted properties come with awkward contracts in place or rents that are set at low levels and can’t be changed due to ancient clauses, and it can be more hassle than it’s worth.

Here are some of the pros and cons you’ll need to consider before investing in tenanted property.

Pros of Investing in Tenanted Property

* There’s no gap in tenants and you’ll get a continuous stream of income and will start earning rent straightaway.
* You don’t have to hunt for new tenants.
* You may not need to refurbish the property immediately, as tenants will already be in situ.
* Tenanted property isn’t so popular, so the sale price may be lower and you could get a good deal on it.
* The property will come as a package, with all the furniture and fittings, so it can save you money on equipping it.

Cons of Investing in Tenanted Property

* If a tenant has been in the property on a long-term basis, and before 15th January 1989, then they may still be on a Regulated Agreement, rather than an Assured Short-Hold Tenancy. This can create all sorts of problems.
* Rents on older contracts can be fixed, so you won’t be able to increase the rent.
* Older contracts may also mean that the, if the tenant dies, the right to occupy the property may pass on to a relative if they die.
* Sitting tenants can be difficult to remove.
* The type of tenants may not be your ideal choice, or out of sync with your ideal tenant profile.

In the main, as long as the tenants are good payers, keep the property clean and nicely decorated and pay market rent (or close to it) then I would personally always be very happy to buy a tenanted property.

If the amount of maintenance and upkeep needed for properties are key concerns for you, then it’s definitely worth carefully thinking about what type of property you want to purchase. Newly built property and off plan properties may win over with their short term benefits of being low on maintenance and upkeep. If the properties have been built and finished well, then in theory they shouldn’t need too much maintenance to be done for a while.

Depending on their age and the overall state of the property, then there may be a tendency for older properties to be more likely to require regular maintenance and upkeep.

However, this isn’t to say that old build properties can’t be low maintenance too. If they’ve been well kept and cared for, in the long-term they may offer benefits for being sturdier than some new builds, with more substantial and thicker walls. 

If you’re not that keen on having to sort maintenance and upkeep problems on rental property out yourself, then it’s a good idea to use a letting or rental management agent. They’ll handle the full lettings process for you, including any problems that arise, and will have a list of reliable handymen to call on in times of need, which takes the hassle away from you and gives you more time to focus on the business side of property investing.

Old build versus new build and off plan property, part 1 – Cost

Old build versus new build and off plan property, part 2 – Renting

As everyone buying investment property will be keen to get the figures adding up and tenants in place, this is a crucial factor to consider when you’re deciding whether to buy an old build, new build or off plan property.

Old Build

Pros – If you’re buying your old build investment property in an established area that already has a good reputation amongst renters, then this will help with the rentability of your property. You’ll also be able to gauge a good idea of how much rent you can expect to get, which is useful for when you’re working on your projected figures.

Cons – When you first take on an old build property, and especially if it’s been through a fair bit of wear and tear, then you may need to spend time updating the property or decorating it. Depending on how long this takes, then you could lose out on getting a tenant in straightway.

New Build

Pros – Buying a brand new property does have its benefits, not least the fact that it should be ready for a tenant to move into almost immediately. As far as making money goes, this is good news for any property investor. Depending on the location and how the property has been finished off, you may be able to charge more for it.

Cons – Depending on the stage at which you purchase the new build investment property, and if it’s on a large development where more building is going on, it does run the risk that tenants will end up living on a building site for a while, which some people aren’t keen on. Some new build properties may tend to be smaller and more squashed in than old builds, with smaller sized rooms and less space outside.

Off Plan Property

Pros – Like new build, there are benefits in attracting tenants to a brand new property and, in theory, you may be able to charge more rent as a result.

Cons – The nature of off plan property, and the fact that you’re buying before an investment property is finished, means that you may have to wait a while before you can get tenants in and start earning. Like new build investment property, there’s also the risk that more building work may still be going on around your house or flat, so tenants may be living amidst noisy building work at first, which doesn’t appeal to everyone.

To start things off, we’re going to begin by looking at the issue of cost, something that’s a major factor in the purchase of properties for many investors.

Old Build

Pros – With old build properties, one of the major attractions is that there’s often more bargaining power available in terms of cost, especially in the current economic climate. In the case of below market value (BMV) properties in particular, it’s possible to pick up some great property investment bargains. Older properties also tend to be bigger in size, so you get better value for money.

Cons – You do have to know where to look to get the best bargains. There will always be some old build homes in desirable locations that hold their value and can’t be bought for a good deal. Some older properties will have suffered a lot of wear and tear, or may need updating. If it takes time, then you could lose valuable time and money before you can get a tenant in.

New Build

Pros – If you’re purchasing a new build property, it’s brand new and you won’t need to spend money on doing it up for rental. Plus, extra incentives are also often available, such as brand new appliances or the chance to choose how the interior is decorated, which can all help with your costs.

Cons – When you buy a brand new property, you’re often paying above the odds for it. Also, if you’re going to use it for rental purposes, you need to be able to make a decent profit from renting it out, especially if you’ve got mortgage payments to cover.

Off Plan Property

Pros – The cost of off plan properties is often a major selling point. As they’re being sold off-plan, as opposed to newly built, the cost can be considerably lower, which attracts some buyers.

Cons – Sadly, the low price can sometimes turn out to be too good to be true. For example, it may be a reflection on the fact that the properties on the development aren’t selling, which could mean that it will take ages for it all to be finished. There’s no fun for anyone, even tenants, to live on a building site.