Considering a Move into Buy-to-Let? Four Top Tips.
Published on July 12, 2015 by Sarah Mac
Market conditions currently dictate that investing in bricks and mortar could be a sound move. Of course, like any investment, buying a property to let offers no concrete guarantees. But if you are planning on taking advantage at a time that is said to be one of the best in which to make a move on becoming a landlord, the following tips could prove very useful.
1. Give serious thought to what’s involved
Making an investment in a buy-to-let property is going to involve committing several thousand pounds and probably taking out a mortgage. As property prices increase, so your potential for making gains above your debt receives a boost. However, should they fall, it could have the opposite effect.
Whilst numerous investors have benefited greatly, it is essential to acknowledge the potential disadvantages so that you are well prepared.
2. Choose the right area
The ‘right’ area doesn’t necessarily mean where you find the lowest or highest prices. Best to look for an area that is desirable to live: somewhere there is added appeal, for example good transport links, excellent leisure and facilities or well-rated schools. What will pull in the right tenants?
This really is the crux of a successful buy-to-let investment: delivering the right type of property to the right tenant.
If you are thinking that investing in a property that’s on your doorstep is a good idea just because it’s local to you and you are familiar with the area, you should perhaps think again. Whilst it is good that you know the market and will be better placed to keep on top of what’s happening with the property, it is well worth considering the fact that a different area may offer enhanced benefits for the rental market.
If you are going to hand over the management of your property to an agent in any case, it shouldn’t matter where it is located. So why not take a look at zones further out, perhaps ones that offer better commuter links or family benefits. You could extend your search to properties in need of refurbishment, in which case you could have the opportunity to negotiate a good price.
This is still one of the best ways to enjoy a fast return on investment, although you will need to make sure the price is low enough to take in the cost of renovations and still leave you with some profit. A good rule to follow is to make sure the final value of the refurbished property is at least the purchase price and cost of works, plus 20 per cent.
3. Target the right tenants
Think about who your tenants are and what they will want in the property, rather than what you would want if you were living in it.
Different types of tenants will have different needs. For example, young professionals tend to look for fresh, modern and stylish properties. Families tend to seek out a blank canvas they can make their own with their own belongings, and students want a place that’s comfortable and low maintenance.
Instead of imagining whether you would like to live in your investment property, put yourself in the shoes of your target tenant.
If you allow tenants to decorate the property as they wish, put up their own pictures and furnish as they wish, they are more likely to feel at home and therefore stay long term, which always spells good news for a landlord.
4. Decide how involved you want to be
Considering how hands-on you intend or can afford time wise to be is important. The main question to ask yourself is whether you will manage the property yourself, or use an agent to do so on your behalf.
Whilst agents charge a management fee, they will take responsibility for any issues that arise. So if there are repairs required, they will be the people who deal with it, so you will not be bothered at all hours, or when you are away on holiday.
Agents will also take care of finding and vetting tenants, dealing with tenancy agreements, arranging required annual safety checks, inventory reports and interim inspections and of course, collecting the rent. It’s well worth considering handing over to an agent if you find handling all of this yourself a daunting task.
Always remember that it pays dividends to take care of your tenants. If you can avoid vacant periods by keeping good tenants on long term, or by creating relationships whereby tenants recommend others to you, then you are onto a good thing. Keeping your property well maintained and building a good rapport with tenants really is highly beneficial.
Take as much advice as you can find!
If you’re thinking of getting into the buy-to-let market and embarking on becoming a landlord, we recommend drinking in all the advice you can find. There’s plenty out there, but there’s no substitute for talking to others who have experienced it first hand for themselves, so if you can, do some networking with other landlords before you make your move. Good luck!