Spring 2009 // contents | back issues | contact us | mortgage express

Yield of dreams

Andrew Strange talks to a landlord whose business-like approach to letting is reaping rich rewards — even in the recession

Landlord Simon Barton is enjoying a yield close to 9% on his properties in Salford and Manchester and is achieving higher returns from his portfolio than ever before. His business acumen coupled with falling mortgage rates have enabled him to thrive.

While his early purchases in his native Macclesfield were largely driven by how much he personally liked the properties and the fact that they were close to his home, it soon became clear that a more serious approach was required if his business was to flourish.

He switched his focus from Cheshire, where yields were typically just 6%, to Salford and Manchester and concentrated on two-bed terraces in areas of high population, such as those around universities or hospitals. His strategy has paid off and he remains prosperous while some other landlords have struggled.

Landlord for all seasons

And with the recession deepening he is taking a more hands on approach to managing his properties so that he can quickly identify the early signs of tenants who are struggling with the rent and try to find a solution. Despite these efforts, one tenant has already moved out after being made redundant from a local factory.

“That’s the down side at the moment,” he says. “It’s a case of keeping very close to your tenants and noticing if they should fall short in rents and immediately knocking on the door to find out what’s happening. Some people apply for Local Housing Allowance at that point and it might be a case of encouraging them to, so that they can cover the rent.”

He is also now offering six-month tenancies so that he knows he can gain possession of his properties within six months. In addition, he is developing a new service to link landlords and tenants on his website (www.rentwellhomes.co.uk), which could become an extra source of income.

“What I don’t need is void periods so I’m also working very hard to make sure that my property is better than the one next door. At the moment people are thinking about saving money where they can so I like to make sure the houses are properly insulated, for example, because that shows up on the Energy Performance Certificate (EPC). And better insulation means lower heating bills.” he explains.

A robust strategy

One of the reasons that Simon has been able to remain successful is that he decided on a practical strategy early on in his buy-to-let career. Now, if he is offered a property he takes a long hard look at the figures before deciding whether to view it: what is the purchase price, what is the likely rent, how easy will it be to find tenants?

Simon says: “When you are starting out in buy-to-let you tend to buy in areas where you are comfortable. In Macclesfield, I knew whether an area was quite near the train station or the town centre. I used to think, ‘I’ll buy it because it is near the railway station’ when I should have been considering what sort of rent I could achieve.”

He has also decided to focus on two-bed terraces for practical reasons. He and most of his friends have lived in such properties at one time or another and he believes that many people who are separated or divorced end up in such properties. Combined with their position in areas of high population he has no difficulty letting the terraces.

Many of his 12 properties were in need of work when he bought them and so he was able to buy at a low price and quickly add value by renovating. With simple furnishings and neutral decoration he has no trouble letting the houses and flats to a range of tenants from Polish immigrants to students.

Simon says: “I am planning to expand my portfolio further over the coming months. While falling property prices have devalued my portfolio for now it has presented an excellent opportunity to purchase new properties and to capitalise on higher yields.”

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