Considering Investing in Property? Here are our top tips for purchasing a buy-to-let property
There are roughly 2 million private landlords in the UK who are responsible for renting out nearly 5 million properties. This means that 18% of households currently rent from a private landlord. This is a trend that is continuing to grow as first time buyers struggle to get on the property ladder and investors continuing to see property as a source of income and future profit. So if you’re considering purchasing a buy-to-let property, we advise you to read our informative guide.
For many, buy-to-let look an attractive investment in a time of low prices and low rates. However, there are no guarantees the market conditions won’t change, so if you are considering investing in property, it’s important to do things right!
If you are planning on investing, or just want to know more, Quick Move Now have put together this essential guide to buy-to-let investment:
1) Research the market – Buy-to-let is not as simple as owning your own home
There’s a plethora of legalities and investing in your first property can be overwhelming. That’s why it’s essential to do your homework and familiarise yourself with the risks as well as the benefits before you decide if buy-to-let is the right investment for you!
2) Understand your financial position
Before you think about viewing properties, take your time to thoroughly go through your own finances to see if buy-to-let is a viable option for you? Buy-to-let investors typically look for 125% of their monthly mortgage repayments as rental amount. To work out your annual return on investment subtract your annual mortgage cost from your annual rent and then work this sum out as a percentage of the deposit you put down. So, if net rental income is £10,000 and the property cost £200,000, the net rental yield is simply £10,000 divided by £200,000 which equals 0.05 or 5%
Keep in mind whether you are in the market for capital gain when you sell or simply monthly rental income. This will help you decide what to buy and where, and what kind of mortgage you need.
3) Choose the right location
Once you’ve decided that buy-to-let is the right option for you, one of the next most important things to consider is where your rental property should be? It’s important to remember that you won’t be living there, so everything you’d look for in your own home is not a consideration. The best rental properties are located where the majority of people would like to live and this can be for a variety of reasons; from towns with a strong economy to transport links and schools & universities.
Investing in a property located in an area with no rental demand would be disastrous. Make sure you research the area and also investigate how many rental properties are currently there. If an area is already saturated with similar properties to the one you are considering investing in, you may want to consider a different location.
4) Buy investment property wisely
Make sure you buy a property which allows for sufficient profit margin. Buying a bargain property isn’t always the best option and could lead to you spending additional money in the long run on repairs and maintenance issues.
As a buy-to-let investor you have the same advantage as a first-time buyer when it comes to negotiating a discount, so remember to haggle on the price!
5) Shop around for the best mortgage
It’s important to shop around for the best mortgage deals. Don’t just rely on your own bank to give you the top rates. There are numerous comparison websites to aid you in finding the right deal for your investment property. Buy-to-let mortgages are in many ways just like ordinary mortgages, but there are some key differences:
- Interest rates on buy-to-let mortgages tend to be higher
- The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (some lenders offer deals with a 20% deposit, others want a 40% deposit)
- The fees tend to be much higher
6) Decorate to suit your targeted tenant
Don’t make the error of decorating and furnishing the property to your own tastes keep it simply and clean and pick natural colours which will offer a blank canvas for potential tenants. Remember you are there to make money out of the property! Allowing tenants to make their mark on a property, such as painting, or adding pictures or taking out unwanted furniture makes it feel more like home – these tenants will stay for longer, which is great news for a landlord.
7) Check for safety
By law you must make sure that the property you are letting complies with various safety regulations, like furniture and furnishings fire safety, gas safety, electrical equipment safety and that it contains a smoke detector. You’ll also need certificates to prove these regulations have been met. It’s important that you keep up to date with landlord regulations – new regulations are often introduced and failure to comply could result in serious consequences.
8) Know how involved you want to be
If you have time on your hands you may want to privately rent out your investment property. For convenience many choose to employ a letting agent who will act as first point of contact if any problems arise.
If you do chose to use an agent, your responsibilities and theirs are completely different. As the landlord you will be expected to pay buildings insurance, ground rent, service charges and insure any items you leave in the property. Your letting agent will be able to advise on others’ responsibilities as part of your contract. The agent will be responsible for finding and vetting a suitable tenant, draw up the lease, collect rent and carry out regular inspections.
9) Don’t be greedy
The likelihood that you’ll see a return on your money quickly is slim. Buy-to-let is a long term investment, so don’t be over ambitious! Don’t forget tax, maintenance costs and other landlord expenses will eat into your return. Experts say invest for income not short-term capital growth.
10) Watch out for¦
From time to time your property may be stood empty which means no income will be generated. Unfortunately, the mortgage repayments still have to be met and as a landlord you must be ready for this! Be aware that as market conditions change your rent may have to change to reflect. You may have to lower your rent in order to stay competitive, but this shouldn’t matter if you’re in it for the long run!
NEED TO SELL A FORMER BUY TO LET PROPERTY?
Are you a landlord looking to sell your rented property quickly? Sell to Quick Move Now, the UK’s largest and original house buyer to clear the mortgage and release the capital.
With UK house prices on the rise, Britain’s growing group of private landlords are struggling to maintain a decent return. With an almost certain increase in mortgage rates over the coming months, some landlords are being left with no choice other than to sell their investment property for financial reasons.
The reasons for selling a rental property can vary hugely. Landlords who personally manage their properties may move and want to buy a different investment property near their new residence. Or, a landlord may want to cash in on the appreciation of a rental property rather than accumulating money through rent.
Regardless of the reason, Quick Move Now can buy your investment property today! For more information, call one of our dedicated experts to discuss your options and to receive your FREE no obligation offer.