8 Buy to let tips for a First time investor

When buying your first buy to let property, there many things to know to ensure that you maximise the potential from the investment. Jumping into buy to let can be financially risky, so we’ve created a list of 10 great tips for buy to let for first time investors.

1. Research the buy to let market

Firstly, have you done sufficient research on whether it’s the best time to invest in buy to let mortgages?

In recent years, the mortgage rates were high so there may have been more effective methods of investment such as high-rate savings accounts. These days, mortgage rates are very low but you may have to contend with falling house prices, which will effectively give you negative capital on the property.

Committing to such a large investment is going to require you to do a lot of research on current markets to ensure that you get the best return for your investment. 

2. Choose the area wisely

Where do you want to secure a buy to let property? You could find a really cheap deal in a place where nobody wants to live, but this may cause issues in you finding a tenant. Therefore, there’s more to choosing the area than finding the cheapest deal.

Look for an affordable area where people want to live for a number of reasons such as; ease of access to public transport, shopping facilities, schools and commuter routes.

3. Work out your return on investment

Do your calculations on how much money you will need to provide in the way of a deposit and the approximate mortgage rates that are available to you, if you haven’t already spoken with a mortgage broker.

You will also need to factor in rental income tax, general property maintenance and letting agent fees. You should also prepare for a vacant property, which will require you to pay repayment out of your own pocket.

4. Shop around for buy to let mortgage deals

Spend a good amount of time finding the best mortgage deal for your investment. You should also consider saving as high of a deposit as you can, as this will decrease the rates you get from mortgage lenders.

Speak with a variety of banks and independent financial advisors. Once you have heard what they can all offer, you can confidently choose a mortgage deal that will suit you and your investment.

5. Find the perfect tenant

When renting out your property, it’s important that you feel comfortable with the tenant who is occupying it. If you don’t feel comfortable or secure with the tenant that you are dealing with, you have a right to stop them from living in your property.

Find someone who is going to suit you and your property. If you were letting a property near a popular commuter route into a major city or town, then a professional looking to move into the area for those reasons would be a good match.

Knowing you have the perfect tenant will give you further security when renting out your property.

6. Think rental yield

Focus on rental yield for your buy to let investment. If you can secure an investment that will give you a high rental yield (realistically between 5-8%), you can be sure to maximise your investment in the long term.

You can work out the yield by calculating the percentage of the rental income per year compared to the price of the property. For example, a property purchased for £200,000 with an income of £10,000 per year has an annual yield of 5% yield.

Expert investors advise that – though house prices are due to rise in the long term – you should look for return in investment through rental income as opposed to short-term capital growth.

7. Get the best price for your investment

Put on your negotiating hat when it comes to purchasing your buy to let property. The fact that you are an investor puts you in a great position to haggle on the price, as you will be a chain free buyer.

As an investor, you are looking to secure the property for the best price you can, so offer low and don’t be talked into paying more than you want to for your investment.

8. Understand the risks

Just like with any investment, there are some potential risks that you should consider when investing in a buy to let property.

For example, there is no guarantee that your property is going to be tenanted for 12 months of the year. Therefore, you should factor in that your property may be vacant for 2 months of the year when doing your maths so that you can be prepared if that circumstance does arise.

Also, house prices rise and fall, naturally. Currently, prices are relatively high, and what with brexit looming over Britain for the coming years, property prices are predicted to take a hit. Therefore, you may not necessarily make profit if your property decreases in price from what you originally arranged to pay for it.

Following these tips will surely help you maximise the potential when it comes to investment in your first buy to let property. If you would like any further information relating to buy to let properties, we’d be happy to help. Good luck from all at Emoov.