Top Ten Tips For Buy-to-let Investors
1. Research, research, research.
The governments recent decision to cap the amount of housing benefit to its recipients could have an effect on private property rental demand. In this sense city centre locations offer the most lucrative form of property investment as there are more professionals looking for residency. Look into the area using local estate agents or internet listings to find the average rental charge for the type of property you want to invest in (e.g. two bedroom apartments in Manchester on average charge tenants between 600 and 700 per calendar month).
2. Look further afield.
Dont just look close by. You may find more affordable houses further afield in a place with a higher rental demand.
3. Student Accommodation?
Traditionally privately owned student accommodation was deemed as the more expensive option with universities offering cheap accommodation that was more favourable in terms of finance. With the recent changes in university fees and many universities selling accommodation buildings to private investors, this has opened windows of opportunity promising lucrative returns.
4. Barter, haggle do whatever to drive the price down.
Buying a property for investment is much different than buying a property to live in. It is for this reason alone that you can really afford to be tough when it comes to haggling, but obviously if you get too unreasonable with the price you are less likely to obtain it. Remember they need to make money too.
5. Balance Sheets
Take into account your mortgage and other payments and work out the monthly rent you can expect to receive to work out what income realistically achievable. You must also factor in the amount for the deposit considering the large percentages now required by some mortgage lenders. You must also factor in the possibility that the property may not have a tenant for a month or two (this particularly happens between tenancies).
6. Speak to people directly
It is advisable to speak to the sellers directly and when doing research dont simply relay on property listing sites. Get advice from local estate agents to get a better idea of local demand and who the market is.
7. Tenants find out about them before you agree to let
So youre at the stage where youve bought the property, everythings in place and youve got a potential tenant who wants to move in. Make sure you get a reference from their previous landlord and their employer (if you have hired a lettings agent to do this they will arrange all this for you). You will also need to look at their recent bank statements and utility bills because you have to be sure that they are able to pay the rent. If you are doing this yourself there are bodies that assist in such matter such as the Landlord Action Helpline.
8. Lettings Management considerations
Bare in mind that being a landlord can be demanding and you are responsible should a boiler break or a pipe burst. Unless you are completely sure that you will be available to your tenants 24 hours a day it would be wise to consider a lettings agent to manage your property for you. They would also deal with gas safety certificates and energy performance certificates. Letting agents are obviously a chargeable service and therefore it would need to be calculated into your accounting and income predictions.
9. Plan B
Before you buy a property ask yourself some what if questions such as: what if the tenant loses their job? What if the tenant cant pay their rent?
Always consult with professionals and have back up plans should something go wrong.
Of course there is much revenue to be gained in the buy to let market it is just wise to understand exactly what youre getting yourself into. As long as you have strategies in place you are more likely to enjoy an investment in property.
10. Exit Strategy
Be aware of your options should the rental market plummet. The current situation is that rental demand is on the rise. Several politicians have been heard in recent press saying hope for best but be prepared for the worst. This is the same in the buy to let market. Buying a property in a good location will mean that you have a better chance of selling should the market fall. If your property is in a very run down area it will be more difficult to implement an exit strategy.
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