Buy-to-let investors start to favour tenanted flats

Buy-to-let investors are increasingly targeting properties with an existing tenant who has signed up for a two or three-year rental agreement, according to LudlowThompson, a London letting agent.

Stephen Ludlow, a director, says: "Traditionally, most landlords prefer to buy properties with vacant possession so they can make improvements before letting it for the highest rent possible. However, a growing minority are attracted to the hassle-free alternative: buying a tenanted buy-to-let property which generates income from day one."

investors are targeting tenanted properties as they are attracted by proven rent payment history; no empty period; regulatory burdens (such as gas safety) taken care of; and low capital outlay because established tenants do not normally ask for big improvements.

"These factors mean the gap between a property's gross yield (usually at least 7 per cent) and the net yield that the landlord will pocket is often much lower than with vacant buy-to-let investments," says Mr Ludlow.

He adds many lawyers recommend re-signing the assured shorthold tenancy under the new landlord's name.