With legislation and tax increasing seemingly year-on-year for
landlords, you might be wondering whether buy-to-let investments are
still a good idea. It’s certainly not as simple as it used to be and
it’s certainly more difficult to make a profit these days on renting a
property. Many people are unsure whether to enter the market and are
questioning whether it’s worth their time and money…
Buy-to-let
investments can definitely be a success, however. Renting is becoming
the new normal with many people unable to get on the housing ladder due
to high house prices. The market for renters is undeniably out there.
So, if you’re thinking of investing in a buy-to-let, what things should
you consider to ensure that you have the best chance of success?
Know the risks
Be aware of the whole picture when making a big step such as this. Buy-to-lets of course come with risks…
-
The amount of rent you can charge varies on a number of different
things, one being wider market trends outside of your control. Rents are
never guaranteed! You will want to at least be able to charge enough
rent to cover the mortgage repayments. - There is always a risk of not
being able to find tenants. This is not a big risk, as the rental
market is large but it’s always worth considering. - Bad tenants. You
should always conduct thorough screening and background checks before
taking on a tenant, but by trusting someone else to look after your
property you will always run the risk of damage, illegal activity or
taking on a tenant with financial issues. Make sure you compare landlord insurance policies to get the best cover. - If house prices fall, the value of your property is likely to fall
too and you might find yourself in a position where you have to sell up
and the sale price might not cover your whole mortgage. More often than
not however, house prices will rise and you might be able to sell your
property for a profit!
Search around for the best mortgage
Finding a buy-to-let is an exciting process. Getting a mortgage is
not so exciting… but it’s an important step and one you should take
your time on instead of rushing through. Don’t just walk into your bank
or building society and ask for a mortgage. Mortgage brokers or advisors
often have access to way more deals that might suit you better, and
will be able to offer invaluable advice on what’s right for you, such as
whether to fix or track rates.
Pick the right location
Certain rental properties will do better in some places than others. For
instance, a flat will be most desirable in a built up area or within a
city, a family home in rural villages or located near to schools and
small new builds ideal for couples in towns. Some of the locations with
the highest buy-to-let yields (annual rental income minus mortgage costs
divided by cost of property) are places with high student populations.
Students will always need somewhere to live and generally don’t buy
property. Could this be a market you tap into?
Rented property
also tends to do well in affluent and desirable areas that people
possibly can’t afford to buy a house in, but could afford to rent. If
you can afford to put your money in these areas, such as London, Oxford
and the Cotswolds, then it’s well worth doing!
Decide on your landlord approach
Landlords come in all shapes
and sizes and you should decide what kind of landlord you are going to
be. Firstly, do you want to enlist the help of a letting agent? It’s an
additional cost as they will charge you a management fee, but a letting
agent will deal with any problems within your tenancy and have a good
network of tradesmen to call in if any repairs or maintenance need
undertaking. A letting agent may be a good security blanket for a new
landlord to fall back on.
You will make more money going solo
however, as you’ll avoid the letting agent fees - but it will of course
be a bigger undertaking. You will be responsible for viewings, finding
new tenants, screening and sorting out repairs and maintenance.
This
might be perfect for many people who like the idea of being in control
and making this project their own. You will be your tenants point of
call and be responsible for looking after them.
Treat your tenants well
and they will in turn look after you and your investment.
