Buy to let and the role of being a landlord can allow you to reap some impressive financial gains. It is generally seen as being simpler and lower risk than stocks and shares, but you still need to follow some vital steps to ensure you are making the most of your investment.
Here’s how you can be a profitable landlord in a competitive market.
Research the best location
Choosing a property for buy to let is all about the location. Tenants can move out at a months notice and will not hang around for a property that does not service their needs. Depending on your target market you will need to consider the proximity to local schools, transport links, nightlife and so on.
Research what competition you will face by using sites such as Prime Location or Right Move. You will be able to see what the going rent is for certain areas and, over time, see which properties take longer to rent out and which areas are popular.
Do your maths!
The excitement of looking around houses can take over all too quickly. Put pen to paper before you view properties and write down the cost of the house and the likely rental yield. Buy to let lenders often require a deposit of between 15% and 30% and the rental income to cover 125% of the mortgage repayments. Some lenders may accept less but at the expense of a low interest rate.
Shop around
Visit your high street bank to compare the different mortgage deals available. There is a wide range of finance options for purchasing a buy to let property these days, including dedicated buy-to-let mortgage brokers to help you get the best deal, so make sure you explore several options.
Target your tenant
Inexperienced landlords are often quick to see themselves living in their properties. Remember you are not the tenant and put yourself in their shoes. A student will require functional accommodation, easy transport to their campus, perhaps a range of local shops, as they may not yet run a car. Young professionals may require something more stylish, perhaps in a location with access to nightlife and good links to road and rail. A family will need space and to be local to schools.
Don't be over ambitious
Sure there are many who have made their millions from property, but experts suggest the days of double digit price rises are over. Focus on the long term and allow the rent to grow over time to help fund additional property investments.
Negotiate
You are in a strong position as a buy-to-let investor being chain free. Vendors are often keen that what can be a lengthy transaction be as swift and smooth as possible. Discounts can be negotiated in order to generate a quick sale.
Understand the risks
Don’t ignore what could go wrong. How many months can you afford to pay the mortgage should the property sit empty for some months. Will you require your money out quickly? The property market has been strong for some time, if there were to be a drop in value could you ride it out? A simple rule of thumb is to factor in the property sitting empty for two months of the year to provide a buffer.
Following the advice above will greatly assist you in being a profitable landlord so that you can make the most of your investment property. For more landlord advice, please don’t hesitate to get in touch with us today.
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