Looking to invest in tenanted property? Here’s 7 reasons why you should

Tenanted properties can offer some of the most compelling bargains in the investment-property market. Here are just seven of the key reasons why you should choose one. 

They’re often very attractively priced 

Tenanted properties only tend to be of interest to investment buyers. That’s a very small market compared to the vast numbers of residential buyers. As such, they tend to be very attractively priced. This means that buyers have more options when they resell. 

If you have a tenant in place, you can also resell for a low price (and still benefit from capital appreciation). If you don’t have a tenant in place, you can choose to market your property to investment buyers. This would probably be the best option for a quick and easy sale. 

Alternatively, you could market your property to residential buyers as well. This would create a lot more competition. It would therefore probably be the best option for maximising price. 

They’re convenient purchases 

If you’re buying a tenanted property then, by definition, you’re buying from a property investor rather than a residential owner. Property investors do not tend to get emotionally attached to their properties in the same way as residential owners often do. Similarly, they tend to be a lot more pragmatic about price, especially when properties are tenanted. 

What investment sellers do tend to value is convenience. This is great news for investment buyers. Buying a tenanted property is usually one of the most straightforward processes there is in the property market.  

To begin with, tenanted properties for sale are usually marketed at a fixed price. This will typically be competitive. There’s unlikely to be a closing date for offers. Possibly best of all, you completely avoid the dreaded property chain. They’re practically unheard of in sales of tenanted properties. 

Tenanted properties also tend to be properties where the transaction process runs smoothly. Property investors know how the property market works literally better than anyone else. They generally know what to do as well as how and when to do it. In other words, you’re unlikely to be held up by somebody else not having their paperwork ready. 

Conveyancing tends to be quick and easy 

Astute property investors think about resale potential before they decide whether or not to buy in the first place. They will generally avoid the “quirky” and “characterful” properties residential buyers might fall in love with. The only possible exception here is in the short lets market but these properties will not be sold tenanted. 

Investment buyers look for properties that are safe from any potentially expensive issues like subsidence and flooding. They also look for properties that require minimal upkeep and have low running costs. Putting all this together means that conveyancing is generally as quick and easy as it can possibly be. 

Properties are already of a suitable living standard 

Even if you’re planning on letting out a property unfurnished, you need to ensure that it meets basic safety standards. For example, landlords must arrange for regular, mandatory gas and electricity safety checks. These will usually have been done and documented before the property is put on the market. 

Most properties in the UK are let furnished. When a property is tenanted, the furniture is usually included as part of the sale. This doesn’t just save you money over having to buy everything new (or try to source good quality, used items). It also saves you a lot of hassle. 

Decorating your own property may be fun but decorating a rental property is a very different matter. Generally, you need to keep decor fairly neutral because you don’t know a tenant’s taste. You also need to balance paying for a sufficient level of quality with keeping costs in check. Figuring this out and organising it tends to be a task most property investors neither need nor want. 

You may get a handy contact list 

This depends on the purchase, but it can be a nice bonus, especially if you’re new to a locality. The seller will almost certainly be working with a letting agent. Even if they’re not, they’ll almost certainly be able to refer you to one in the local area. Alternatively, you can move the property to your own letting agent if you have one and prefer it. 

The seller may also be able to refer you to other useful people in the area. For example, if you plan to take care of maintenance yourself, they may be able to refer you to reputable, local tradespeople. 

You’re spared a tenant search 

Tenant searches are an inevitable part of property investment. They can, however, be draining for landlords especially if you conduct them yourself. If the property is still tenanted, then you have to work around the existing tenant.  

You can get reasonable access to the property. You cannot, however, force the existing tenant to go elsewhere while you’re showing the flat to prospective replacements. You also can’t force them to tidy it up. Actual damage can be taken out of their deposit, but clutter is entirely their call. 

Even if you get a new tenant before the old one leaves, you may still have to deal with the financial impact of a void. If you don’t, then the financial impact grows. You may also have to start thinking about security issues. 

You have to make sure to conduct your tenant search in a way that’s demonstrably compliant with the Equality Act 2010. The key word here is “demonstrably”. It’s not just enough to do the right thing. You have to be able to prove you did the right thing. Depending on where your property is located, you may also need to conduct Right-to-Rent checks. You will probably need (or at least want) to do credit checks and take references. 

You have proof of yield 

This can be particularly useful for property investors who need financing. You don’t just have to tell prospective lenders what you think the property can earn based on past performance and/or comparables. You can show them exactly what the property is earning now alongside details of the actual running costs.