Property investing can be lucrative but do you know the basic’s?
Due to the recent tax crackdown on buying property for investment purposes, it’s no surprise that it has worried a lot of landlords. Nonetheless it is still a popular choice as people gravitate to and trust brick’s and mortar because they believe they can add value to a property over time.
If your considering a buy-to-let for the first time or your a seasoned veteran.
Here’s our Top Ten Buy-to-Let Tips!
1: Research, Research, Research Buy-to-Let
Especially if your new to the buy-to-let market. Ask yourself!
Do you understand the risks?
What do you know about the market?
What are the benefits?
Remember, The more research you do the better chance of success you will have!
2: Location, Location, Location
Choosing that lucrative area to invest in is vital for success. I know this is a phrase often over used in the property industry but there’s a good reason why and it shouldn’t be ignored!
Put yourself in the tenant shoes and ask yourself if you want to live in that area? Cheap property is not a reason to buy! Spend some time in the area, WALK the streets, town and visit the local shops. Get a vibe for the community and if it feels right then you’ll know but do this on several different days. Check out things like local schools, transport links, universities etc.
If it’s your first property, you may want to stick close to where you currently live as you already have a good local knowledge.
3: Do the numbers add up?
Sit down and compare property prices and the rent your likely to get, think about the type of tenant you want!
Remember, most buy-to-let lenders want your income rent to cover at least 125 per cent of the mortgage repayments and some are demanding 150 per cent. Check out some lender deals and also don’t forget to factor in maintenance costs.
4: Get the best buy-to-let mortgage!
You need to shop around and don’t just walk into your high street bank and ask for a mortgage.
It’s always a good idea to talk to a good independent broker who can explore your options for you.
5: What type of tenant do you want?
Think about who you are and what they want?
Bear in mind most tenants like to make slight changes to a property and put their stamp on it, this is always a good thing in our experience because if your willing to accept this, then it can encourage a tenant to stay longer.
6: Rental Yield Vs Capital Growth
In all investments we make, rental yield is far the most important aspect to us. Rent income is the key return for buy-to-let investments.
The aim is to achieve a rental return substantially over the mortgage payments. Cash flow is key, then once you’ve built up a pot, invest again and again.
7: Adding Value to a Property
It can be worth looking at properties that are in need of work but only if you have the resources to control the costs. Employing individual contractors to carry out the work can lead to spiralling costs.
Just remember to buy at the right price to cover any refurbishments costs and factor in a safety net.
8: Negotiate the Price
As a buy-to-let investor, we have so many choices with properties, so don’t buy the first one. Submit low offers to achieve the best deal.
9: Understand the risks of buy-to-let
Before you jump in and make any investment, you must fully understand the risks because things go wrong and we have learnt personally the hard way.
Things to bear in mind.
House prices rise and fall. Can you still hold your investment if prices fall?
Rates may rise? How will this affect you?
What happens if you have no tenants and your property is empty for 2 months?
Maintenance and Repairs!
This is an unknown variable can quickly kill any profits. What will you do if your property needs a major repair?
Research Tax Implications. Soon all mortgage interest will no longer be able to be set against rental income before income tax is calculated.
10: What type of landlord do you want to be?
Will you be renting the property out yourself or will you take a hands off approach!
There are lots of options out there, research what’s right for you!
If your looking after your tenants then they will look after you! Fixing problems quickly and looking after maintenance issues will be good for building a bond between you and the tenant.
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