Making a success from a buy to let property involves much more than purchasing a house and finding people to occupy it. There are a raft of issues prospective landlords must check and think about before they part with their money.
Buy to let is not a ticket to fabulous wealth. There are many pitfalls which prospective landlords can fall into if they do not do their homework properly. Location, amenities and size are just three considerations you must bear in mind. However, if you get all the right elements together, your buy to let investment will provide you with a lucrative, long-term and steady source of income.
Location is one of the most important points to consider if you are thinking of entering the buy to let sector. As you plan to rent the house out to other people, you have to think about what tenants may need. Families, for example, will want good access links, parking facilities and all the amenities one would expect to find in a family home. If it is families you plan to market to, are their schools in the area and are they of a sufficient quality?
Students, on the other hand, will want something completely different. Parking and transport links may be less of a concern as proximity to their learning institution. Your choice of location will depend partly on who you plan to market your investment to.
Another crucial point to bear in mind when entering the buy to let sector is the long-term potential of the area you are thinking of buying in. Is it a place where people want to live? Are there a large number of students in the area? Does the town appeal in any special way? These are just some of the questions you need to ask yourself before you part with your money.
It is important to work out from the beginning what your investment objectives are. The beauty of entering the buy to let sector is that if you do your homework and make a sound investment, it can deliver you significant returns over a long period of time. If you are looking for capital growth, you may be wise to look at other investment vehicles. With property prices having fallen and are predicted to continue to do so by many industry figures, capital growth will not be achieved easily through a buy to let property.
Buy to let is not about quick returns or capital gain. It is about establishing a steady income stream over the long term.
Before you begin looking at properties, it is a good idea to sit down and work out the cost of the houses you are interested in and the likely returns you will get through the rent. Another consideration is obtaining a mortgage. With many lenders asking for a 25 per cent deposit, accessing mortgage finance has become more difficult. For cash-rich buyers, this is less of a problem but for those looking for a loan, it is crucial to think about how they will obtain one.
After buying a property, what will your next move be? Will you rent it out yourself or through an agency? With regards to the former, this will save you money but will require you to adopt a more hands-on role. Should there be a problem with the house then it will be your responsibility to rectify it. That could mean being called out at unsociable hours. You will also have to take care of advertising costs, although these can be reduced by using then internet to market the property.
Using a letting agent will give you more convenience but you will be charged a management fee for the privilege. A letting agent will take care of any tenant queries and as many have strong connections with electricians, plumbers and other handymen, they are well placed to sort out any problems.
Buy to let insurance is something else you need to consider. Having a comprehensive insurance policy in place will save you from having to pay substantial amounts for any significant problems which could arise. While it is another expense, the peace of mind it can provide you make it a worthwhile investment in the long run.
Plenty to think about
A buy to let investment is not a walk in the park. There is plenty you need to sit down and think about before making the investment. You should not be tempted to cut corners in any respect, as taking the time to plan the investment will see you enjoy better returns and happy tenants.
Thanks to Simple Landlords Insurance for providing this article.