How to make a successful buy-to-let investment
Investing in bricks and mortar has always been viewed as a safe bet when it comes to making money. While there’s no denying that buy-to-let isn’t the cash cow it once was, thanks to low interest rates and the wide variety of mortgages available, being a landlord is still a popular choice for many.
But how do you make sure that you invest in the right property if you're planning to become a landlord? Here are some top tips to help you make the right choice.
1. Do the numbers add up?
The primary purpose for most landlords is to make money by renting out a property. If this is your goal then before you do anything else, you should make sure that the numbers add up.
Many buy-to-let lenders will expect the rent to cover between 125% and 150% of your mortgage repayments. To get the best mortgage rates, a substantial deposit will be required.
And of course, you need to factor in arrangement fees, maintenance costs, and the implications of the property sitting empty for periods of time.
There is money to be made from buy-to-let, but you must invest wisely.
2. Research the market
When you’re considering which area to buy a property in it might seem obvious to buy in the area where you live. After all, you know the vicinity well, you can be on hand to help your tenant if there are any issues, and you know that it's an excellent place to live which will attract interest.
And while this does make perfect sense, you need to weigh up the pros and cons of taking this approach. Be mindful that if the price of property falls in your area, then you have two houses that are affected rather than just the one.
It may be better to search for other ‘up and coming’ areas so that you can buy more house for your money. Research the transport links, local schools and amenities in the area.
The more appealing your property is, the more likely you are to find a tenant prepared to pay the right price.
3. Buy with your target tenant in mind
Ultimately, your success as a landlord depends on your ability to rent out your property which will be made easier if you buy based on what your target tenant will be looking for.
Do you want to appeal to students? If so, then you should look for properties in areas which offer plenty of opportunities to socialise with pubs and restaurants within walking distance.
If you want to attract families then buying near good schools surrounded by lots of outdoor spaces that children will enjoy becomes top of the agenda. Families are also much more likely to rent a property that has a garden and a downstairs toilet which should be considered when buying a property.
Another popular target tenant for many landlords is the ‘young professional’. A property close to strong transport links with a good internet connection, simple décor and quality fixtures are a must.
Ultimately, you should always buy the property that your ideal tenant would like to live in, not what appeals to your tastes.
4. Understand the risks involved
It’s not a case of becoming a landlord and sitting back to watch the cash roll in. The buy-to-let business can be tough. You should be aware of the cons, as well as the pros, of being a landlord.
While mortgage rates are low right now, they’ll inevitably increase. Make sure that you can afford the repayments when the rates rise.
There are also lots of things that can go wrong when you rent out your property. Boilers can break, and pipes can leak. Bad tenants can even decide to trash your house leaving you with a hefty clean-up bill well after they've gone.
Although it's easy to think that these things will never happen to you, things can and do go wrong, and so you need to be prepared for all eventualities as a landlord.