Since the mid-1990s the buy to let sector has blossomed into one of the most important parts of the UK housing market.
It facilitated a shift in the way many people viewed properties, with bricks and mortar being seen as a potentially lucrative investment vehicle, as well as a place for people to live.
The 1988 Housing Act was one of the key moments in the history of buy to let. It established a framework which gave prospective landlords guidelines for renting out properties, while giving tenants legal protection.
Another decisive moment came when the Association of Residential Letting Agents (ARLA) established a buy to let panel. The aim of the panel was to help ensure ARLAs members could access buy to let mortgages with rates in line with those found with residential loans.
The six major firms which formed the group helped devise a range of affordable buy to let products which saw the sector gather momentum to become one of the most important sectors of the housing market.
Between 2001 and 2007, the buy to let sector enjoyed its boom years, with landlords seeing lucrative returns on their investment. While the economic downturn hurt the sector, like every other area of the property market, it has enjoyed a relatively impressive recovery and landlords with properties in London and other parts of the country seeing increasing rental yields which look set to carry on for the foreseeable future.
Like every investment vehicle, buy to let offers you plenty of advantages and disadvantages. There are numerous issues you must take into account before you invest in your first house. However, when done correctly, a buy to let investment can give you a steady income in the long-term and offer a significant return on your investment.
Buying the property
A buy to let investment is something which requires plenty of research. Location, size, amenities and many other things need to be taken into consideration. The first thing you must do is research the market. It is of the utmost importance that you know as much about the property and the area you are buying in as possible.
For example, is it an area with a lot of students? If so, the chances of securing tenants on a regular basis are high, provided the abode is of sufficient standard. This leads onto the next point, which is who the property will be marketed at.
With increasing numbers of families choosing to rent rather than buy, you must take into account the needs of the modern family if that is who you plan to target. Parking facilities, sufficient rooms, access links and local amenities must all be taken into consideration. To make a property attractive to families, it must have all the facilities they would want.
The importance of doing thorough research cannot be understated, as acquiring as much knowledge as possible will see you avoid mistakes with regards to location, renovation and renting the property out.
Another important point is accessing finance. Like all mortgages, buy to let mortgages come with stricter lending criteria than in the boom years and it is generally more difficult to access finance. For cash-rich investors, this is less of an issue but for those without sufficient liquidity, obtaining a mortgage will take plenty of hard work and endeavour.
Tax and insurance are also important factors when it comes to property investment. Having adequate landlords insurance in place will help cover for rainy days and save prospective owners significant amounts of money should any major work need doing on the house. In the early stages, bringing an accountant on board to ensure all tax requirements are met could prove a useful investment in the early stages, as there will be a lot of number crunching and payments to work out.
Becoming a landlord
There is more to becoming a landlord than purchasing a property and making it available to rent. Becoming a landlord is a long-term commitment and requires hard work and dedication if the returns are to prove lucrative.
Once you have purchased your first house and made it attractive to potential tenants, the next job is to find people to live in it. There are two main options with regards to this. The first is to go through a lettings agency. This will greatly increase your chances of finding tenants, although the agency will charge for their services. Another advantage of using letting agents is that they will usually take care of any problems that arise with tenants, meaning you can have a less hands-on role in day-to-day management.
The other option is to go it alone. By advertising the property on the internet, local newspapers, shop windows and through other mediums, you can spread the word and bring it to peoples attention. Such a strategy may not prove as successful as going through an agency, but it will save you some money.
A sound investment
With a buy to let investment, there is plenty to think about before parting with your money. Location, size, price and mortgage availability must all be given serious consideration. However, if done correctly, a buy to let investment can provide you with a lucrative revenue stream and return on your investment.
Thanks to Simple Landlords Insurance for this informative article