Investment Properties: Rental income

View rentals in Spain
View rentals in France
View rentals in Portugal
View rentals in Florida
Whether it's a 1 bedroom flat in London or a rustic 3 bedroom farmhouse in France , with a little bit of planning you can make it pay for itself or even provide an income from it.
Types of property

Long term lets

These would normally be for a period of six months or more, although shorter lets for as little as one month can be organized. The standard let would be organized on a rolling contract giving both the tenant and landlord one months' notice to terminate the let after the initial 6 months is up.

The big decision is whether to organize and manage the let by yourself, or leave your property in the agents' hands. In the UK over the last 5 years the number of people looking after their own properties has increased dramatically. There are many benefits if you do choose to do it yourself.

The biggest incentive is saving money. Estate agents will charge anywhere between 12-15 per cent to manage your property. This is a huge chunk out of your rental income. However, it never hurts to negotiate the rate!

It may of course not be feasible for you to arrange the let buy yourself. The investment property may be in another country, you have a very busy job and don't have the time required, or you simply want to leave it to a professional.

Agencies will:

• Carry out credit check on the tenants
• Organize all payments and deposits.
• Provide legally binding contracts.
• Advertise in their shops and website.

If you decide to let it by yourself, make sure you get a contract, which are very easy to obtain. Standard ones can be bought and downloaded from the internet or even from larger newsagents. Both you and the tenant will sign two copies, and each party will keep one copy.

On the contract you will state the tenants full name, the length of contract, notice period, weekly/monthly rent, when it should be paid, and the deposit.

The deposit varies but it's normally 4-6 weeks plus, the tenant would be expected to pay one month up front. So for a £500 a month rental they would pay either £1000 or £1250 before moving in. The deposit minus any breakages would be paid back when the rental finishes.

Foreign long lets

If buying an investment property abroad with long term lets in mind, remember that the rental markets are very different to those in the UK . In France , a much greater proportion of the French population rent property compared to the UK , but the tenants also tend to have much greater protection than they do in the UK In the USA there are many rules and regulations on safety measures that must be in place, also strict rules on how you must account for your earnings.
See specific countries for more details countries

Also think about the location. You are far more likely to get long lets in cities, or areas where the are a lot of jobs, than you are near an idyllic beach. types of property

UK or foreign make sure your insurance knows you are renting the property, this may make you premium slightly higher. more info see house insurance

Holiday Lets

Getting it set for renting

If you've just purchased your property, there may still be a few improvements / touch ups you need to do. The sooner these are completed, the sooner you can market your property and start earning. Be careful to get any work carried out to a high standard as a lot of rentals, especially for holiday lets will be chosen purely through photographs so make sure the property looks it best.

• Unless you are intending to use your property for the bulk of the year, try and keep your personal taste to a minimum and decorate in neutral tones. Also don't leave to many belongings on show, guests won't necessarily want to be reminded they are in someone else's home.
• Look at the competition to see what extras they have. Extras such as satellite television, washing machine, jacuzzi should all be included on the description.
• Decide whether you want to provide linen and towels, or whether you would prefer holiday-makers to bring their own. If your providing them ask the guest to launder them before they leave.
• Write out a welcome pack. This should explain how things work in the property, such as the oven, washing machine and the electrics. A list of local shops, bars and restaurants and activities will be appreciated. A feedback card or visitors comment book will give you information on which you accommodate for future tenants. The more the guest enjoy their stay the more they are likely to tell their friends and come back.
• If tenants stay for more than a week, you might want to consider getting a cleaner during their stay to clean the property and do the laundry.
• Make sure you get insurance - buildings and contents - from the country your property is in, and tell them that it is being rented out to make sure you are covered in case of damage or accidents. for further details see insurance

Advertising and managing the property

You can either go it alone or advertise and manage the property yourself, or link up with a letting agent and let them do the hard work for you. Doing it all yourself should mean your returns will be higher as you won't have to pay an agent's commission (usually 20%), but it can be hard work.

By yourself: If you are intending to go it alone then you'll need to draw up a standard contract for use with each let, make sure that you take deposits at the time of booking (20% is standard) chasing up the remainder about 8 weeks before the holiday.

Advertise in newspapers, magazines and on the internet. There are numerous international rental web sites which will cost up to £100 a year to advertise on. Displaying your property alongside others in the relevant country, area, size and price range. Holiday makers are then given your details and you arrange the let.
Using an agent: By using an international letting agent you will benefit from their marketing expertise and database of customers. Many of the big travel groups have rental arms and will display your property in their brochure and on their web sites. They will also do all the paper work for you allowing you to sit back and wait for the cheques. These services come at a price of around 20% of the rental commission. Sometime more if you are using a local agent.

Other Costs

You will have to pay tax on any rental income. How much you have to pay, and to which government, will depend on where and how you have bought your investment property. For example as an individual or via a specially set up company.

The UK has double taxation agreements with many countries so you shouldn't have to pay twice, and you will be able to offset expenses like trips to check on the property and some maintenance costs, against tax on rental income. An accountant will be able to advise you further. See more on fees and taxes

Year round rentability

Where you bought your property will determine how many weeks of the year it is full. A property on the French Riviera for example, will be more rentable than inland Portugal , both for weather and amount of tourists.

If you are relying on rental for large portions of the year, split your research into areas. For example some places in France will only see rental for three months of the year where as certain areas of Spain could expect up to nine months. Remember, there are both summer and winter lets and not everyone's idea of a holiday involves the beach, dining al-fresco every evening on the sun terrace overlooking vineyards. Information on different properties

If using the property as a holiday home, take your holidays in the off peak period leaving your property free for rental during the busy periods.

Before making any investment property purchase based on a rental income, always plan for the worst case scenario.

For example if after your research you find that similar properties in the same area are rented for around 22 weeks of the year, you should calculate to see if you could afford the repayments if the property was only rented for half the number of weeks. In theory the first year will have the lowest rentals and if you can cover your repayments on a worst case scenario, then your investment should be safe for the years to come.