What’s The Best Type of Property For BTL/To Rent Out?

Best Property For Investment & BTL

What ya’ thinking?

It’s a simple question, with varying simple answers depending on which wally you ask.

Be that as it may, this wally is about to work his simple and wholly subjective answer into the ground, ’cause I’ve got a formula that I refuse to deviate from, and I’ll happily chew anyone’s ear off into submission – even if they’re not listening.

The perfect property to put to work on the rental market:

  • House
  • Freehold
  • Two bedrooms
  • Allocated parking
  • Back garden

But why?

If you can suddenly feel your stomach crawling out of your hairy butthole because you’re concerned that my formula doesn’t match yours, don’t worry – just because your formula sucks royal balls, it doesn’t mean you can’t turn things around.

No, I’m joking. To each their own ‘n all that.

I’m truly surprised I haven’t already covered this boring-arse subject, because it’s a question every landlord asks at some point. Better late than never, ‘spose. In any case…

If you’re a crusty old veteran in the game, then you’ve probably got your own makeshift formula, and you’re also likely too stubborn to deviate. I can respect that. However, please don’t try and convert me with your hog-wash! You can do as you please behind closed doors, just don’t go flaunting it in front of my face! It’s disgusting.

I know for sure that many landlords are rabid fans of three bedroom houses. In fact, what prompted me to tackle this topic is a Tweet that recently appeared on my timeline, from a fellow landlord, that was mentally ejaculating over three bedroom houses.

I mean, they’re okay’ish, but nothing spesh.

“WTF are you smoking, muttonhead?”, is what I should have responded with (I didn’t). Instead, I’ve decided to take the moral high ground and bore you to death with my take on this exceptionally bone-dry issue… Enjoy!

My definition of “best”

Before getting into the thick of it, I should define what I mean by “best”, otherwise there’s a good chance none of this will make sense.

Is the “best” BTL property the one that returns the most money (i.e. Return On Investment)?

For the vast majority of landlords, probably. And that’s fair, and arguably the best approach. However, that’s not the case for moi.

But don’t get it twisted, I’m definitely in this game to stack cheddar to the high heavens in order to create enough wealth to buy your family and put them in monkey suits for fun, but I’m also acutely aware of how utterly limited my tolerance is for pressure. In other words, I’m not a fan of meddling with resource hungry and volatile situations; I’d rather take a pay cut for the privilege of hiding under a rock so I can blissfully avoid stress. And, to be fair, I’ve made no secret about the fact that I’m one giant fanny, and that’s why I’ve always endorsed my low-risk property investment strategy. A strategy so sensible that it’s unlikely to get anyone rich anytime soon. The golden rule is simple: minimal debt (which is terminal cancer for scaling, and goes against the “debt culture” everyone seems to be peddling and/or embracing).

While some people thrive under pressure and eagerly wave it over like they’re signalling a street worker from across the road, I can only admire such brashness and resilience from afar. Moreover, I have an extremely low barrier to entry for what qualifies as hassle. I think old age has something to do with it, I’m definitely getting worse. I find myself saying, “what’s the fucking point?” to pretty much everything these days.

“Sounds like you’re not cut out to be a landlord, you miserable prick?”

It’s true, maybe I’m not built for it. Alas, I’ve gone too far now, I’m deep in the game, so fuck you! I’m stuck here. So all I can do is attempt to reduce my exposure to turbulence as much as possible.

That’s precisely why I avoid throbbing headaches like HMOs; they contain are too many moving parts, which makes the margin for error terrifying, and significantly greater than single-lets. The thought alone of dealing with five different households under the same roof, let alone the high tenant turnover rate, makes me sweat 2ft dildos.

“Hey Landlord, Arnold keeps pissing on the toilet seat!! Can you please tell him to stop?”

“Not really, but I’ll happily hack his pecker off and toss it down your gullet. Capeesh, darling?

Who actually wants to willingly expose themselves to these nonsense situations? “What’s the fucking point?”

Miraculously, I’m still able to be objective and appreciate and understand the merits of HMOs, and why so many landlords lap it up. Apparently stuffing an army of humans into an inadequately small property is extremely profitable, and the aggro that comes with it is a fair price to cough up. Especially if you’re a busy-body that adores problem-solving.

However, ultimately, I strive to keep my investments within the tiny and declining range of my personal tolerance threshold, while still remaining profitable, even if that means hindering my earning potential. It’s a balancing act.

Perhaps I’ve accidentally stumbled onto the most important point of my meandering ramble: every landlord should decide what they’re trying to achieve, what their limitations are, and in-turn determine the best approach for them.

Who knows, you might have a set of gigantic cahoonas that’s willing to manage a crumbling 8 bedroom Victorian death-trap, in comparison to my puny acorns, that can’t even stomach a basic and modern flat.

Why a house (and not a flat)?

You can actually buy the freehold of houses, unlike flats, which are those ghastly leasehold things.

Leasehold properties can be such miserable ball-aches, can’t they?

  • Leases need extending
  • Sub-letting restrictions
  • Sinking fund
  • Service charge
  • Ground rent
  • The quirks that come with communal areas
  • …etc!

I go into more detail in my Are Leasehold Properties Good For Buy-To-Let Investments? blog post, if you’re vaguely interested.

I know a buttload of you have leasehold BTLs, and while that’s totally cool, I’m also hopelessly compelled to offer you my condolences.

Why two bedrooms?

  • Two bedroom properties hit the sweet spot because it attracts the broadest market i.e. they appeal to couples, small families and singletons.

    I don’t think anything else hits it quite the same. Apart from your mum. (I’m sorry, the joke was calling, I couldn’t resist. I swear I’m not 14yrs old).

  • The bigger the property, the more resources it requires to maintain.

    I know many landlords can empathise with that dreaded feeling of having to refresh a property in-between tenancies; we can’t market the dump until it’s fit for viewings, so every day is an expensive and anxious race to the finish line.

    My anxiety levels rocket off the charts before having to repaint/revamp an entire house, because I know the entire process can be emotionally and physically exasperating. Fuck, just thinking about going through that [again] makes me want to jump off a cliff.

    I can’t even begin to fathom how much I’d loathe my existence if I knew I had to tackle a property larger than two bedrooms.

  • Similarly, larger properties naturally attract larger households, which inevitably heightens the odds of collateral damage.

Why parking?

I don’t know what your experience has shown you; mine has made it clear that driveways and allocated parking bays are highly desirable features, particularly outside of metropolitan city centres, where motor vehicles are as critical as a beating heart to survival. No one wants to be scrambling around for parking spots, least of all after clocking off from our dead-end nine-to-five.

Parking space is always in demand and has always proven to massively increase traction.

Why a back garden?

Again, this ties in with creating maximum appeal and meeting demand. Maximising appeal – without giving mixed signals to completely different audiences – is the name of the game!

Green gardens to families are like cocaine to stock-brokers. They can’t get enough of it.

In reality, this is really a non-issue though, because we’d be hard pressed to find a two bedroom house without a back garden, so it’s not a feature we’d really need to hunt for – it’s usually just there, like the roof. A two bedroom house without a back garden would be weird. However, I thought I’d toss it onto the list because I personally wouldn’t buy a house without one.

What about…

Allocated parking space, back garden… what about something more glamourous like a downstairs lavatory with a bidet?

I hear you, good sir. Valid point. The market for ass-washing devices on the ground floor is exploding, after all.

To that, I say, if there are grounds to believe that there’s a bog too few, then it’s usually possible to add one, albeit at a cost. However, neither love nor money can cure the chronic ailments of absent land [required to accommodate parking space and a garden].

What I mean is, there are potential shortfalls and problems that can never be fixed, which can result in a constant Achilles heel, ultimately impacting the success and failure of a BTL, so it’s always worth considering what can and cannot be changed.

“I THINK YOU’RE COMPLETELY WRONG!!”

Alright, settle down, Alice, no need to blow a gasket.

If this is where you ended up, then I’ve failed you miserably. Or, alternatively, you’re a total mess and you’ve failed yourself and your monkey-suited family. Let’s just say it’s the alternative for the sake of ease and sticking with the odds.

My point is, there is no one right answer (although, there are plenty of wrong ones); everyone should apply their own best suited strategy. You do you.

As a final point, I do want to say that all bets are probably off if I happen to unearth an absolute bargain, even if it’s a gut-wrenching 2+ bedroom property that will most likely result in self-induced vomiting on a colossus scale and a rapid decline in my mental health. There’s always a glimmer of hope that I might go off script if a rare opportunity presents itself.

As the youth of today say, YOLO!

26 Join the Conversation...

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Jackie V 31st March, 2022 @ 09:19

You are spot on. We always buy two bed houses. Love Victorian and so far so good. We have never had an issue. PS god you make me laugh! Nice to hear someone saying it as it is instead of trying to pussy foot around. Thank you !

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Phil 31st March, 2022 @ 09:20

I'm so happy to have found you and to agree with so much of what you say. All these people paying min down, doing up the houses, remortgage then buying another just scares me. All that day and so close to a recession what if banks just recall the lot. I'm obviously soft as shite as well.
I was however curious about your rear 😬 must there be grass or are you happy with a yard. Realise it doesn't matter much, I'm just curious.

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Malcolm 31st March, 2022 @ 10:06

My investment strategy is very different to the original posters. I have always bought 2-bed ex local council flats in north London (Tottenham). The reason for this is because they are much cheaper than private properties thus they give a much higher rate of return. In addition, they require much less expense in terms of repairs as all external work is the responsibility of the Council as freeholder. These properties are also extremely popular with tenants so there are never void periods.
I would never consider a Victorian property in London because as freehold you can be hit with all sorts of expenses and their price makes the rate of return less favourable than ex locals.

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Tony Mimms 31st March, 2022 @ 10:34

Hi, Great topic. I agree to your view almost wholeheartedly! I have been a landlord almost 20 years now and had a mix of 2 and 3 bed houses. Small portfolio that reached 9 properties but now down to 3 as on a glide path to retirement. Achieving my modest goals in life with the help of the 3 beds in that for a small extra premium in the early 2000's resulted in greater equity when selling the properties now. I think the key is getting the right tenants. Not always possible, I know, but a good example of what worked for me was a 3 bed house I bought in 2006 for which the first and only tenant remained in situ until I sold it to the tenant in 2019 at the market rate. So I would expand your sweet spot just a little :-)

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Deborah Clare 31st March, 2022 @ 14:31

Completely agree. I've only ever rented out 2 bed terraced houses and it's worked well. I've never struggled to find tenants. Most tenants have been long term and there's been little need for redecoration etc. However, a 3 bed would be useful as I will eventually lose an excellent tenant of 9+ years due to her needing a bigger house now. She's asked if I can buy one for her to move to, but sadly that's not possible.

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JMH 31st March, 2022 @ 14:33

Really interesting blog as usual. Up in Scotland we don’t have leasehold, everything is freehold plus most modern flatted developments have allocated parking. I wonder if your aversion to flats would be less if you operated up here?

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Vikki Baptie 31st March, 2022 @ 14:47

Yep, totally agree, we usually go for houses with 3 beds+ to cut down on turnover (I strongly dislike finding new tenants). I also like ex-council to overcome the feeling of "stealing" houses from FTB's... I'm nice like that haha! But also families on council estates usually aren't going to purchase their own house and move out... did I mention I hate finding new tenants ;-)

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mikeLL 31st March, 2022 @ 16:17

I've got a 2 bed flat (Scotland) so not leasehold, i really hate the idea of Leasholds too. and an HMO in England. HMO is definitely the more profitable however it's rented to students and on one tenancy agreement so they have joint liability. Like you said Landlord i can't imagine how much hassle a proper HMO (the bedsit variety) would be. Profitable but way too much hassle. I do have to find new tenants every year or two with the students but i incentivise them to find the next students for me rather than use an agency and as they aren't always the tidiest i reward them with a couple of large pizza and a bottle of wine if i do a planned visit and the house is tidy. I've found that lowers the hassle factor and ends up working well. If it wasn't for that HMO though i'd also say 2 bed or 3 bed at the most would be my target market. Good Post Landlord....as ever

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Beryl Williams 31st March, 2022 @ 18:44

Why don't you deal with the problems that is worrying us all? EPC and Julie James' draconian Act?

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Aaron MJ 31st March, 2022 @ 18:58

Another interesting blog.

One must agree....there's no hard and fast rules. I treat a portfolio like any business. Cash flow, running costs, maintenance, fees and so on.

I personally like to have variation in my portfolio, from a few select location small 5 to 7 bed HMO'S, a block of 4 studio flats in a detached freehold property, to a few 2 bed houses then several 3 bed terraces, quasis and semis and only a couple of long leasehold 2 bed flats, both in excellent areas and bought very cheap, plus BMV.

Ergo, spreading the risk and creating cash flow.

Last point and very important. Not too geared up!

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The Landlord 31st March, 2022 @ 19:07

Thanks for all the comments so far, folks. Loving to see that the 2 bedroom house crew is strong :)

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The Landlord 31st March, 2022 @ 19:09

@Phil

Preferably grass. Although, not a game changer if not, because as mentioned, as long as the space is there, the garden can be renovated to include green if it makes sense.

When you say "yard" my mind instantly imagines a gloomy uneven patio, with an old rusty broken washing machine, lol

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The Landlord 31st March, 2022 @ 19:12

@Malcolm
All good Malcom, if that works for you, amazing.

However, I'm presuming that the ground rent/service fees that the occupier (e.g. the tenant) pays is what actually funds any external work, and it's not coming out of the Council's charity pot.

Yeah, I agree, there are certain risks that can come with buying the wrong old Victorian house. They can cost a fortune to maintain if certain things haven't been modernised (e.g. heating, electrics etc).

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The Landlord 31st March, 2022 @ 19:16

@Tony
Def agree that getting the right tenant is ultimately key to a successful let. But as you said, that's not always possible, so for the sake of limiting my risks (because I'm so fragile), I prefer two bedroom houses.

I'm not totally against 3 bedroom properties, I think they can make fantastic investments [for someone else]. I was just defining my perfect rental property :)

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The Landlord 31st March, 2022 @ 19:21

@Deborah
Oh wow, I'm in pretty much EXACTLY the same position.

I've had an amazing tenant for almost 6 years, and she recently gave birth to a second child, so I know it's only a matter of time before they outgrow the property. She asked me if I'll have a three bedroom property available in the future (which I won't).

It's going to be very sad to lose her, but that's part of the game and one of the trade-offs. But I guess a family can also outgrow a three bedroom property (although, appreciate that it's less likely).

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The Landlord 31st March, 2022 @ 19:23

@JMH & @mikeLL

I literally have no idea about the property market in Scotland - it's a different world to me.

I had no idea that the majority of flats are freehold, that's cool. So in that case, who actually owns the land, the communal areas, and who manages it?

@JMH I'd need to know how it all works, but I'd definitely be more interested/open to it, for sure.

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The Landlord 31st March, 2022 @ 19:26

@Vikki
Hah, I soooo feel you!! Finding new tenants is almost as hell'ish as renovating!! I absolutely dread it.

That's one of the primary reasons why I avoid HMOs - the high tenant turnover rate would destroy my soul! Gosh, I really couldn't take it.

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The Landlord 31st March, 2022 @ 19:41

@Beryl

I'm sorry (and please don't take offence), but you sound like a broken record. You have repeated yourself in several posts now, and it's becoming very weird.

Firstly, I have recently sent out a newsletter about the EPC regulations *potentially" changing. Nothing has been decided yet, it's just been proposed. There is no new EPC regulation. If it happens, I will probably blog more about it then.

Secondly, not *everyone* is worried, because as said, nothing has been decided. Moreover, not everyone is in the same situation you are in (i.e. some landlords have properties that are more energy efficient than yours).

Finally, a few people replied to your EPC comment in a previous blog post (where you left pretty much the same comment), but you never replied. There was even a local chap to you, that wanted to discuss the situation.

What MORE do you want?

Once again, I'm sorry, but please stop leaving the same comment over and over, because you don't even seem to be engaging when someone responds, and it's making me weep.

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The Landlord 31st March, 2022 @ 19:43

@Aaron

Dear Lord, you're definitely a bigger and braver man than I'll ever be. But that's awesome you're making it work, but more importantly, you're comfortable with your setup. That's certainly the main thing!

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north west landlord 31st March, 2022 @ 22:18

Generally agree, with a few But's.

On the leasehold front I had a 2 bed semi (now sold) where the leasehold charge was 1 peppercorn per year. (yes really) They didn't collect it. I've got a 2 bed terrace where the lease is 1000 years at £2 per year, with 870 to go. I paid £40 so they can remind me again in 20 years.

On the bedrooms front I look for 2 bed, but a bargain modern 1 bed was too good to turn down, and an ex council large 2 bed was converted to a 3 bedder, variety is the spice of life so they say!!

From the yeild the 2 bed terrace will have repaid all investment after 9 1/2 years beating the 3 bed conversion by 6 months. But if I were to sell the terrace has appreciated by at most £50k where the 3 bed has increased by at least £70k.

This Landlord lark isn't all doom and gloom.

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Petr 2nd April, 2022 @ 07:05

agree with some of it - outside of London and rather in the north, the two and three bedders are popular, for me, as well as Aaron, buying 1 or 2 bed flats ex-council flats is the main strategy. Often easy to get a council tenant through the council who would pay their rent (LHA's very near market value plus tenant can always top up to market rent if agreed to do so). Also, since there is very high demand for and very low supply of accommodation and especially in places like London, there are many schemes councils offer to leaseholders now including managing the property free of charge. The ground rent is usually £10 per annum and service charge around £1000 per annum, the buildings insurance is paid by the council so myself as a landlord just need to cover landlord's insurance and possibly contents if but usually renting them unfurnished. As Aaorn suggested above, these single lets are a lot more profitable with decent ROI compared to houses or other flats in London. Minimal voiding periods and although some say that BTL is the very bottom of the property investment pyramid with usual cash flow of about £150/month (many of whom being in negative cash flow as well), I am averaging above £700 pcm whilst self-managing (or council) which is comparable to most of HMO's. Managing HMO's just means a hassle to me that I wold prefer to avoid

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Stephen 2nd April, 2022 @ 07:24

Thanks for your amusing and insightfully opinion on the 'best' BTL Property.

I have a portfolio of similar properties and concur with your thinking about larger properties. Sure, there is more top line money to be made with larger houses and HMOs, but at a larger cost. The Nett returns are not far off the same and, when it comes to sell them on, the Market for new Landlords will always greater for smaller properties with the right facilities (Parking & garden).

I look at it this way: Why drive a big flash car, with all the extra expenses, when a smaller one will still keep me warm and dry, whilst getting me from A to B for far less money. - Why drive an Audi Q7 when an Audi A3 will do the same job, for less? (& give far less Tax to HMRC in the process) Besides, who wants to flaunt in the face of your tenants: Look what your rent has paid for me?

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Richard 2nd April, 2022 @ 09:27

Hi, I must confess I agree with just about everything you have said except I do favour a 3 bed. Now so many people are working either full or part time from home I just think 2 beds is now to restrictive.
Richard

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Jennifer 2nd April, 2022 @ 20:35

Thanks for the interesting blog, can only agree with the less hassle attitude. With you all the way, though our 2 props are both modernish 3 beds with garage ensuite etc.

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Chris 22nd April, 2022 @ 18:47

Yep, two bed (three bed lower ROI, and harder to populate), with one parking space and a small garden consisting of a patch of concrete by the back door (for BBQs), and grass. Then, no hedges, no shrubs – just a fence. I’d consider a small (ideally plastic) shed containing a cheap, new, lawnmower though (the only item I’d include with the contract), as you can bet the tenants wont mow the lawn, and this gives no excuse. No garage (doesn’t add any extra revenue - I kept the garage for myself as a lockup... didn't make a blind bit of difference).

However, I have been tempted by one-bed flats near main line stations… also a student HMO possibly has merits (has multiple guarantors, plus you’ll never get stuck with sitting tenants, and you’ll never struggle to replace them). Hmmm....

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Grumpy 19th May, 2022 @ 06:57

Hi Landlord,

I e Not popped in for a while.

The best rental property is one with no tenants…..

Grumpy
(Ex landlord)
(Where is my ex landlord emoji)

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