Purchasing a property with the intention of renting it out is an attractive long-term investment for many people. Putting your money in bricks and mortar rather than the hands of bankers or financial advisors is regarded as a safer alternative in today economy.
Even so, there are no guarantees or certainties when it comes to the housing market. From location and type of property to tenants and insurance, numerous factors have to be taken into consideration. So here are our top ten tips regarding buy-to-let investments.
1. Do your research
It is imperative to research the buying and renting trends in the market you are looking at. The local area might be awash with students looking to rent, or it could be for affluent homeowners only. Speak to an estate agent about the most popular types of property on the rental market.
2. Do the figures
Once the research is complete, work out how much you're willing to spend and how much rent you're likely to receive. Typically, lenders want rent to cover 125% of mortgage repayments. Think about what you'd do if the property sits empty for a couple of months and how much you'll have to spend for up-keep and maintenance.
3. Are you in a position to renovate?
Buying a property that needs repairs or modernisation to bring it up to a decent rental standard will inevitably be cheaper. However, will you need to spend out on materials and labour? Or can you do it yourself?
4. Finding the right mortgage
Although it will be tempting to stick with your bank or building society for a buy-to-let mortgage, this probably would not be the greatest deal. Shop around to see which lender has the best rates or approach a specialist broker.
5. Know your target market
When it comes to decorating, put yourself in a potential tenant is shoes. Students will want something basic yet comfortable, while young professionals are more interested in style and functionality.
6. Invest for income
Although buy-to-let is a solid investment, it is not the booming market it was several years ago. So if you are interested in short-term capital growth, think again. Invest for income and be mindful of rental yield - the annual rent received as a percentage of the purchase price.
7. Understand associated costs
As a landlord, you are responsible for paying income tax on money you receive from tenants and capital gains tax should you decide to sell the property. You will also need to take out appropriate buy-to-let insurance to protect against every possible eventuality.
8. Negotiate price
Purchasing a buy-to-let investment without having to sell a property to fund it puts you in an incredibly strong negotiating position. In today's tough market, make a low offer and stick to it.
9. Know what can go wrong
Weigh up the pros and cons and understand what could go wrong. Make sure you can still make the investment worthwhile even if the property sits empty for two months a year. The housing market is unpredictable and prices can drop with little or no notice.
10. Private or estate agent?
Although you can make more money renting out the property privately, this can be a substantial drain on time and even resources. Agents will charge a management fee, but will deal with any problems as and when they occur.
Even so, there are no guarantees or certainties when it comes to the housing market. From location and type of property to tenants and insurance, numerous factors have to be taken into consideration. So here are our top ten tips regarding buy-to-let investments.
1. Do your research
It is imperative to research the buying and renting trends in the market you are looking at. The local area might be awash with students looking to rent, or it could be for affluent homeowners only. Speak to an estate agent about the most popular types of property on the rental market.
2. Do the figures
Once the research is complete, work out how much you're willing to spend and how much rent you're likely to receive. Typically, lenders want rent to cover 125% of mortgage repayments. Think about what you'd do if the property sits empty for a couple of months and how much you'll have to spend for up-keep and maintenance.
3. Are you in a position to renovate?
Buying a property that needs repairs or modernisation to bring it up to a decent rental standard will inevitably be cheaper. However, will you need to spend out on materials and labour? Or can you do it yourself?
4. Finding the right mortgage
Although it will be tempting to stick with your bank or building society for a buy-to-let mortgage, this probably would not be the greatest deal. Shop around to see which lender has the best rates or approach a specialist broker.
5. Know your target market
When it comes to decorating, put yourself in a potential tenant is shoes. Students will want something basic yet comfortable, while young professionals are more interested in style and functionality.
6. Invest for income
Although buy-to-let is a solid investment, it is not the booming market it was several years ago. So if you are interested in short-term capital growth, think again. Invest for income and be mindful of rental yield - the annual rent received as a percentage of the purchase price.
7. Understand associated costs
As a landlord, you are responsible for paying income tax on money you receive from tenants and capital gains tax should you decide to sell the property. You will also need to take out appropriate buy-to-let insurance to protect against every possible eventuality.
8. Negotiate price
Purchasing a buy-to-let investment without having to sell a property to fund it puts you in an incredibly strong negotiating position. In today's tough market, make a low offer and stick to it.
9. Know what can go wrong
Weigh up the pros and cons and understand what could go wrong. Make sure you can still make the investment worthwhile even if the property sits empty for two months a year. The housing market is unpredictable and prices can drop with little or no notice.
10. Private or estate agent?
Although you can make more money renting out the property privately, this can be a substantial drain on time and even resources. Agents will charge a management fee, but will deal with any problems as and when they occur.