We’ve all seen the soon-to-be landlords knocking down walls with glee on Homes Under the Hammer, but other than a whole lot of cash and a knack for interior design, what does it really take to become a buy-to-let investor?
After the recovery from 2008, the post-crash property market has grown non-stop, presenting an extremely attractive opportunity to gain some capital for little or no effort.
We’ve compiled a list of ten top tips to get your investment dreams off to a running start:
Research, Research, Research
Any seasoned buy-to-let investor will know the key to buying a successful and profitable property is research.
There’s no end to the questions you can ask about a property, and it’s essential to know the nitty gritty in order to plan financially as well as to manage the load of work.
It’s also important to have good knowledge of the benefits of property investment. Being knowledgeable aids being realistic, meaning a much better chance of capitalising on your properties.
Research, research, research, and then research some more.
Identify the potential issues early on
If a property needs a lot of maintenance, investors must be careful to plan for this expense in advance to avoid any nasty surprises down the line. Meticulous and consistent budgeting for these issues is essential to staying level-headed and above-water during any projects you may be undertaking.
Does it all add up?
One word: Yield.
Any investment decisions should focus on this if you are to make a healthy profit. A property’s ‘yield’ is an expression of its likely annual return on investment based on rental income as a percentage of the property’s value.
Being aware of what buy-to-let mortgages are available to you is also necessary research.
Pick the right location
Researching the area is also key to know what tenants would be most attracted to the property, and what rent should be charged. Yield rates fluctuate up and down the country; it’s important to understand what to expect in this regard before committing financially. This article gives a good insight into some of the UK’s best areas for yield rates (Hint: It’s not all about London).
Effective tenant targeting
Once acquired, all decisions about a property should be made with the new tenants in mind. This will ensure the new tenants are comfortable with rent pricing and the feel of a property. It will also mean you know what to expect from the tenants (If the new tenants are students, expect blocked drains!), leaving you more capable to deal with any issues.
You should also think about how to make each tenant feel at home. Even small things like allowing them to keep pets, hang their own pictures and paint their walls can have a big effect.
“If residents feel like it’s their home, they will value it more and stay longer”. A longer tenancy helps to avoid incurring expensive gaps in tenancy more often than is necessary.
Have a healthy pinch of realism
Finding the perfect property isn’t always easy. It requires time, money, more time and more money. Be realistic about house prices, rental yields and prospective tenants, as this will help to ease you into the process and to avoid any disappointments on the way.
Be patient and realistic about your goals and everything will fall into place with less hassle.
Have you looked further afield?
Yes, you know the area where you live and the type of tenants who live nearby, but by looking further afield you could find areas set to grow or that are high in demand.
Research up & coming areas or projects that could lead to increased demand and you’ll be in a better position to secure a great investment. For example, when the new Elizabeth line opens fully at the end of 2019, taking around 200 million passengers a year between Reading, Heathrow and Shenfield, commuters will be even more open to living along the line in Berkshire.
Achieving the best deal possible can take a lot of legwork. Don’t just settle for the first price or option you are given. The obvious first rule of thumb is to offer 5-10% below the asking price, as often sellers will put their house up for more than they would actually accept to test the waters.
Above all else, stay realistic throughout the process. There are often issues that arise and you should be prepared to ride the wave to an extent.
Decide how involve you want to be
If you are looking for a larger project, consider that buying a property in need of refurbishment could present a fun task and a larger profit at the end. This is of course a huge task and not to be taken on lightly (not without research anyway!)
Once a tenant has moved in, there are many different ways of getting involved or staying far away. Make sure you choose the right option for you in order to feel comfortable.