Buying property to let has proven to be a wise investment for many, especially when carefully planned and researched. Here we take you through the key steps to consider when getting into the property investment game and becoming a landlord.
Researching buy-to-let mortgages
Have a look at all the different deals available at present. Borrowing rates in recent times have been historically low but it’s always good to remember and prepare for mortgage terms changing in the future and you need to be confident that any rental income will comfortably cover the cost of your mortgage. Many lenders require that rental income will in fact cover 125% – 145%, giving you a comfortable buffer. As with any mortgage application, you will need to prepare to give a lot of evidence of your current financial situation as well as having a decent sized deposit, usually between 20-30% of the property value. Take to our experts at The Mortgage Hub and we can guide you on the best available buy to let mortgage for your circumstances.
Finding the right letting agent
Working with a reputable and experienced letting agent in the area you are looking to invest will help from the get-go. You could develop a great working relationship that could see you through all stages of the process, from finding the right property, marketing your property in order to find the right tenants to the management of the rental property in the longer-term. Online agents can look costs-effective, but remember they may not have that all-important local knowledge or presence.
As this is likely to be one of your biggest investments, it makes sense to plan it out carefully and thoroughly. Calculate whether now is the right time to invest and what your long term aims are. Are you looking to increase monthly income, or put your money into bricks and mortar to watch it grow? If you can only afford a smaller property right now, prepare for a higher turnover of tenants who will potentially outgrow your property more often. This could also mean more instances when the property is empty and you are short on paying tenants. Larger HMO properties ideal for students are usually always easier to fill and give great returns as you can proportion the cost per room, this can be more costly to set up and there are many restrictions to factor in with HMO’s. This will all be shaped by your location…
Deciding on location
If you live near to a college or university, a flat suitable for students could be a great investment. You may not need to spend as much doing up a property, as it will only need to be comfortable and safe rather than a more permanent home. Smaller properties in central, urban locations could be ideal for professionals or young couples. If you are more rural, you might be able to rent out a larger family-sized home but pay attention to things like good schooling and amenities that all impact desirability and your potential for a successful let. Speaking to your letting agent about areas that are up-and-coming can help establish where people are increasingly looking to live and whether property value is likely to increase long-term.
Are you open to an older property that might need updating? You can pick up this type of property for an attractive price but go in with eyes wide open on what any renovations will mean in terms of time and budget. It’s important to not get carried away with renovations as you will not be living in the property yourself. Rental properties need not always have the latest most attractive kitchens and bathrooms, but should be clean, fresh, and safe for tenants. Newer, ‘walk-in’ condition properties will be easier to get on the market from the get go, but may cost more and perhaps have fewer unique selling points.
Work out your monthly rental income
Remember that rental price is often the key factor for tenants, so trying to recoup the costs of a newly installed kitchen by hiking up rent will only drive many potential tenants away. Be clear on how much you will be able to realistically charge for rent per month by speaking to your letting agent and doing research in the area – ideally before you buy. This will help you keep on track financially and ensure the best outcomes for your buy-to-let investment in the long run.
Talk to our experts and see if becoming a landlord is a viable option for you and your goals.