Tenanted buy-to-let properties offer attractive investment opportunities

A new analysis by the Lomond lettings agency group has highlighted the potential benefits of investing in buy-to-let properties with tenants in situ. Despite their rarity, these properties can offer significant savings and immediate rental income, making them a worthwhile consideration for investors.

Substantial Savings on Market Value
The study reveals that buy-to-let properties with existing tenants account for just 2.8% of total sales listings. However, those who manage to find such properties could save up to 25% on the market value of their investment. According to Lomond, the average asking price for a property with a tenant in situ is £149,124 across Britain, which is 15% less than comparable market values. In Scotland, this discount can reach as high as 24.6%.

Immediate Rental Income and Reduced Hassle
Investing in a property with a sitting tenant offers the primary advantage of securing guaranteed rental income from the outset. Lomond emphasises that “a property with a sitting tenant is one way of investing in the rental market with minimal fuss.” The tenants have already been vetted, and the previous landlord has likely addressed compliance requirements such as gas safety certificates and licensing for HMOs, providing peace of mind to new investors.

Additionally, a tenanted property can be a less daunting investment since much of the initial administrative work has already been completed. This includes ensuring the property meets all regulatory standards, reducing the burden on the new landlord.

Scarcity and Investment Yield
The current market offers approximately 12,423 investment opportunities with a tenant in situ across Britain, representing just 2.8% of all available homes. In London, this figure drops to 0.3%, while Yorkshire boasts the highest proportion at 6.3%.

Lomond notes that properties with sitting tenants can often be undervalued because potential buyers may be deterred by the existing tenancy agreement. This reduction in market value can actually benefit buy-to-let investors by increasing their yield. “A sitting tenant can often devalue a property due to the fact that any potential buyer inherits the responsibility of the tenancy agreement,” Lomond explains. This deters owner-occupiers but presents a lucrative opportunity for landlords.

A Rare but Valuable Investment Opportunity
Buy-to-let properties with tenants in situ present a compelling investment opportunity for those who can locate them. The potential for immediate rental income, reduced administrative hassle, and significant savings on market value make these properties an attractive option for investors. As the Lomond analysis shows, while these opportunities are scarce, the financial benefits they offer are substantial, providing a clear advantage in the competitive property market.