We may hear that golden era of buy to lets is coming to an end. In the current property market it is unrealistic to make a fortune, but if you believe that traditional “bricks and mortar” are safer than stocks and shares try to minimise your potential problems.
If you are buying your first buy to let property, research your market.
Demand for rental accommodation is quite strong, but some areas are
oversupplied with buy to let properties and you may find it difficult to
rent.
Choose a good area. Location is very important; you must aim to find the
right property in the right place. Find out what is “hot” in your area
and what to avoid. Make a contact with letting agents and take into
account their advice.
Before you will decide which property to buy, you must try to identify
your potential tenants. Once you have established who you want to target,
decide what to buy.
Apartments are easier to rent in towns, close to university campus,
while big houses are best in the country, unless they cater for students.
Calculate how much cash you can put down as a deposit and how much you
will need to borrow.
There are many buy to let mortgages to choose from, but expect to put
down as much as 25%. Don’t just accept a deal from your bank, shop
around. Consider using services of an independent whole of market
mortgage advisor as they will go through thousands of buy to let
mortgage deals, while an advisor your own bank is restricted to their
own products.
Check your property rental potential. It may be a good looking apartment,
but avoid investing in developments or areas, where most owners are
investors.
Negotiate the price of the property as you are not dependent on a chain.
Decorate in neutral colours as “prescribed by a house doctor”; try to
create a low maintenance garden and make sure that you property is well
maintained.
Try to calculate as many what if scenarios, as possible. Will you be
able to maintain mortgage payments if property will be empty for few
months at the time, will 1% increase in interest rate will affect your
rate, if house will need to repaired, will you be able to afford it?
Speak to an accountant and consider your tax implications. You may be
liable to pay an income tax on rental income and capital gains tax on
sale.
Consider if you want to use a professional letting agent or do
everything by yourself.
When you are embarking on a buy to let scheme, you must create your
projected figures and review them on a regular basis.
