More people are being tempted by buy-to-let, despite it being a potentially risky investment. The dream is that you can quit your job and become a landlord full-time, and it can turn out to be very lucrative, all of which can make it an attractive option.
But how should you ensure you get the most from it?
Choose Your Area Carefully
It’s all about location for homeowners, and this applies to landlords as well. Look for an area with a large population of working-age people, and study the amount of rented accommodation so that you can choose somewhere there is not too much available.
Talk to local estate agents to get their advice. You can find out more from Andrew Reeves Countrywide or another agent in your area, and you can use their advice to guide your decision making.
Focus on the Tenant’s Needs
The goal should always be to focus on your tenant and their needs. Don’t think about how much you would like to live in your property yourself, and instead focus on the needs of your target tenant.
Students, family, young professionals – whoever you are targeting, they will have their particular preferences when it comes to the number of rooms, the features and the style. You may want to allow them to decorate so that they can make the place more their home, and this may encourage them to stay for longer.
Look After Your Tenants
Don’t just meet the needs of your tenants: go beyond this by making their stay in your property a positive experience and focus on keeping them happy. Fix the things that are your responsibility to fix and take care of them, answer their questions and be there when they have any problems. Gov.uk has some good advice on being a landlord and all of your legal responsibilities, so make sure you know the rules.
Buy a Low-Cost Property and Improve It
The Telegraph reported on some successful landlords who have made fortunes in buy-to-let. One of the stories featured was that of Jim Haliburton, and his model is to buy a two- or three-bed property then spend some money on converting it into a five- or six-bed property. This will increase the value of the property, and he will then take out a mortgage of 70 per cent of its new value. This is one possible model that may work for you.
Work Out the Figures
Always go over the figures because getting your sums wrong can ruin the investment. When it comes to the mortgage repayments, rent should usually cover 125% because this is what most lenders will want. Study everything including mortgage costs, maintenance costs and more, as well as looking at specific circumstances such as what could happen if no one rents it for two months.
Get a Great Mortgage
Shop around and compare your options when it comes to finding a mortgage. Don’t just go to your bank, and instead get advice from an independent broker so they can give you advice on the best option for your situation.
Haggle for the Best Price
Always haggle over the price. You are a tempting proposition for sellers because you are either paying in cash or you have a mortgage, and this can provide you with a good opportunity to get a better deal.
Are homes taking a longer time to sell at the moment? Use that to your advantage. And always do your research. If the seller is moving away for a new job, they may be more keen to get the sale out of the way quickly.
Consider Other Investment Options
It’s also a good idea to know when buy-to-let is not the right option. This is an investment, so consider your other investment options. Could your money do better somewhere else? Are you prepared to take the risk by tying up your capital to a property, which could then fall in value? Just make sure you go in knowing that this is the right choice for you.
Start Researching Your Buy-to-Let Investment
The most important thing to do when you start looking into buy-to-let as an investment is to take your time. Do not rush into a purchase without spending a significant amount of time researching the market and knowing what you are getting into. It can also help to speak to a landlord with a large portfolio of properties to get some first-hand advice to help you avoid common mistakes.
Building up a number of buy-to-let properties can be a fantastic way to invest, and it could even turn into your full-time job. Just make sure you start off slowly and avoid making beginner mistakes to ensure you get off to the best possible start.
Peter Gough is a real estate investor of several years. He likes helping others and shares his tips and advice online. Look out for his articles on investment and property blogs.