Top Tips for Buy-to-Let Investors
Buy-to-let investment is a highly lucrative area in terms of income and capital gains. But before you dive into this type of property investment, make sure you know what you’re taking on.
Research the buy-to-let market
If you’re new to buy-to-let, make sure you do your homework first.
The starting point is to look at the price of your potential investment property and the rent you’re likely to get from it. As a rule of thumb, buy-to-let lenders will expect the rent to cover 125% of the mortgage repayments, sometimes 150%. They’ll also expect a deposit of around 25% or more. You may also have to take into account arrangement fees.
On top of this, can you afford to have the property sitting empty? You should factor in at least a two-month void period. And have you taken maintenance and letting agency fees into consideration?
You may also want to think about taking out an insurance policy against tenants that don’t pay the rent. Rent guarantee insurance is available as a standalone product from specialist providers, or it can be included as part of a broader landlord insurance policy.
Decide if you’ll manage the property yourself
You could choose to rent out the property yourself, or you may get a letting agent to do it for you.
Letting agents will offer a range of options. They can handle complete management including finding and vetting tenants as well as dealing with all the administration and maintenance of the property. Alternatively, they can offer a maintenance-only or a tenant- find-only service.
If you decide to handle the maintenance yourself, make sure you build up a network of decent tradespeople such as plumbers and electricians that you can call on at any time. And if you’re going to tackle finding and managing tenants, you should ensure you’re fully aware of all the tenancy agreements you’ll need to administer.
Match your tenant to the location
Think about your investment property and the area in which it’s situated. Who is going to want to live there? Are you in a commuter belt with good transport links? Are there decent local schools for young families? Or is there a university nearby?
Young professionals may be looking for a fully furnished flat without a garden as they typically want low-maintenance. Alternatively, a family may prefer an unfurnished house as they have their own furniture and would appreciate some outdoor space.
Students will generally house share and will want somewhere clean and comfortable with white goods included.
You’ll need to match your property with the tenant who wants to live in that location, and in the type of home you have to offer.
Find the best buy-to-let mortgages
There has never been a bigger range of buy-to-let mortgages available, so shop around for the best deal.
If you’re new to this area of property investment, talk to independent brokers, and they’ll help you to search out the best buy-to-let mortgage products on the market. They can also offer advice on whether to go for a fixed rate or tracker mortgage.
As well as speaking to brokers, do your own research online and find out what the high street banks and building societies are currently offering.
Talk to the experts
If you’re new to buy-to-let, seek out seasoned property investors and ask them about their experiences. Most will be happy to share their knowledge and let you learn from their mistakes.
The more research you do – the more successful your property investment is likely to be.
Would you like to learn more about property investment?
Register for our course: An Introduction to Property Investing
Our Property Investing Masterclass will help you to understand the different property investment strategies that you can use in today’s property market.
Dates: 6th and 7th June 2019
Venue: Marriot Hotel, Heathrow
Book Now! limited to just 30 places