Before 2007, the buy-to-let market was booming. But, after the credit crunch, many investors lost money or had to sell their properties quickly.
Nonetheless, we trust in purchasing bricks and mortar. And with the help of low-interest rates, buy-to-let still offers an enticing investment opportunity.
But before you leap in and start spending money on buying a property, make sure you do your homework (especially if you’re new to the game). To help you find the right buy-to-let for you, here are six things to consider before you sign on the dotted line.
1. Do your research
If this your first time looking to buy-to-let? If yes, take time to familiarise yourself with the market—what are the risks, what are the benefits? Speak to other buy-to-let investors to get an idea of what to expect.
2. Pick a location carefully
If you want to make money, ideally you buy a place cheaply in an ‘up and coming’ area and then cash in later down the line. But economic forces are unpredictable, and you could you waiting a very long time before your property is worth astronomically more. It’s makes more sense to choose a location that suits your needs and those of your potential renters.
So, how do you work out where’s the best place to buy? Here are some useful questions to help guide you find the right spot.
- Do you want to invest in a property close to where you live already or further afield?
- Do you want a fixer-upper property, or would you prefer somewhere that’s ready to rent immediately?
- Identify potential selling points, e.g. transport links, good schools for families, near-by attractions, close to the beach, city centre, green spaces.
- Can you afford to buy where you want? If not, where can you afford?
3. Know your tenant
Different tenants have different needs. For instance, young professional renters are looking for good transport links, so they can commute easily, access to a parking space, a functional kitchen with mod cons and high-speed internet.
In contrast, rental priorities for a family will differ. Things like local parks, good schools and the general safety of an area may be more important than a parking space or the proximity of local restaurants.
4. Work out the costs
Get out a pen and paper and work out the maths—you need to know the numbers beforehand. For instance, what percentage of the rent does your mortgage lender expect you to pay towards repayments? Rates will vary considerably so speak to a few lenders to get the best deal. You’ll also have to pay arrangements fees—again these will vary.
Don’t forget to include in your calculation’s things like maintenance costs, gaps between tenants, periods of no occupancy, interest rises. Be aware how these factors will this affect your finances in both the short and long term?
5. Understand what it means to be a landlord
Decide how involved you want to be in managing your property—are you going to do it all yourself or will you use an agent? You’ll be expected to pay a fee when using a high street estate agent, but in exchange, they’ll deal with the tenants and any issues such as plumbing or faulty appliances.
In contrast, if you’re planning to do it yourself, here a few things you’ll need to do:
- market the property and arrange viewings
- set up tenancy agreements
- deal with tenants’ issues and organise repairs, e.g. leaks and breakages
6. Find out about your legal responsibilities
A buy-to-let is much like running your own business—this means you have certain legal responsibilities you must comply with. For instance, paying tax, making sure you have the right assessments or certifications, e.g. gas safety certificate. Moreover, as a landlord, you also have a responsibility for the well-being of your tenants, so this means being available to assist in any problems or issues they have.
Need help selling a property?
If you have a property you need to sell quickly—there are lots of options available to you. You can use a specialist company like House Buy Fast, which offers a ‘we buy any house service’, to manage the entire process on your behalf.