When investing in property many investor’s ask themselves the question of whether they should go with a single-let or multi-let strategy. It is all dependent on a number of factors and also whether you know how to successfully manage a multi-let. Even though a single-let property can provide you with a safe solid investment due to the potential security of a long term tenant, a multi-let can still provide this when done correctly, alongside a bigger cash-flowing reward. You do however, have to be aware of all of the factors so that you can make an informed decision on whether a multi-let strategy is right for you. Dependent on what kind of investor you are and what goals you have set yourself, you may be looking for higher cash flow from less properties, which is something a multi-let property can provide as long as it is done properly, and you understand what is involved.
What is a multi-let property?
A multi-let property is where you rent out each bedroom individually, instead of renting out the entire property to one person or family on a single Assured Shorthold Tenancy (AST). This type of property is usually rented out to people such as students or young professionals, who each have their own bedroom and then share the communal spaces.
I personally find there are benefits to both strategies, but if you are thinking of going down the multi-let route, then here are some points below to consider so that you have the best chance to run your multi-let strategy smoothly.
Make it attractive for the tenant: You can provide less hassle for the tenant by paying the utility bills yourself and then splitting the cost between each tenant within their rent. This makes it more convenient for the tenant as they are only paying one single payment each month, rather than having to worry about their payments changing each month due to a higher heating or electric bill. By making it easier it encourages the tenant to stay long term in the property which secures a more manageable investment.
Think about any extra costs there are compared to a single let property: Whilst a multi-let property can provide higher cash flow it can also often require more capital input from the start. This may be from the fact that the property has a higher purchase price, or because it requires furnishing and extra legal requirements up front. The cash flow from the property long-term can certainly make this extra cost worthwhile, however it is important to bear this in mind at the start so you can budget correctly, and make sure it fits in with your strategy at that point.
Thinks about whether the property needs a HMO licence: You will need to license your property if it is more than two stories high, and if there are five or more tenants in the property. You can get guidance and prices on licences for multi-lets from your council but this is something to look out for and budget for.
Consider what target tenants are in your investment area: If your gold mine area is located where there is a high demand for student accommodation, blue collar, or white collar workers, then a multi-let strategy would be good for you to use. If your investment area does not cater for this market there are alternative strategies you can take, such as a single let family strategy. Knowing what areas cater for different types of tenants is key as different tenant types will be looking for different things. For example students will want to be close to university and amenities, however young professionals will want good transport links to work.
Time scale: Many people believe that a significant amount of time is taken to manage a multi-let property in comparison to a single-let. If you manage your time correctly and ensure everything you do is systemised you can make sure this time is minimised. The time taken can also be dependent upon the location of your gold mine area and how far you are from your property, which are also things to think about.
Keep to one area if possible: By sticking to one gold mine area this will allow you to manage your multi-lets easier. Keeping to one investment area also has other perks, such as knowing your target tenants, which will makes it a lot easier for you to find new tenants if one is to leave. It also gives you the opportunity to get to know your area well, and what type of properties do well in what streets or areas.
Legal requirements: One way to use a multi-let strategy to maximise your monthly return would be to refurbish your property to create more rooms. When carving up a property to create more bedrooms, there are always legalisations you need to follow. For example the size of the rooms and the shared facilities that should available. Before you decide to refurbish your property you will need to find out exactly what you need to do to stay compliant. You can do this by getting legal advice and contacting the local housing officer at the council for guidelines and instructions.
Tenant turnover: With the very nature of the types of tenants you have in a multi-let, it means there could possibly be more turnover with these properties. You will likely be renting to students or young professionals who will finish university or finish their contract at work. Therefore it is likely that the tenants will not stay as long as a family in a single-let property and so this is something to be aware of so you can budget accordingly.
This is just a brief outline of what to consider when you are using a multi-let strategy.
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