There might be an array of reasons and experiences which have finally led you to the decision of investing in a buy-to-let property. Buying property to let it to a tenant, has been a controversial practice, and you will find people presenting their views both in favour of and against the practice. However, if investing in the stock market is not your cup of tea, investing in real estate is the next best thing.
However, like any other investment, buying property to-let is a risky affair, and you must research thoroughly well, about the market trends, the risks involved, the profit percentage that you should expect, and the hassles that come along with letting your property to someone, before arriving at a decision.
Although, if you have your heart set on investing in a buy to-let property, here are a few tips to help you gain the maximum out of your investment:
Research is key
Before arriving upon the decision to invest thousands of pounds on a piece of real estate, one must dedicate a chunk of their time to thorough research. This research must entail, whether buying to-let is the best use of your money or whether your money could grow better in another type of investment, whether you wholly understand the risks that come along with buying a buy to-let property or not, whether you have enough savings to bear a drop in the property rates, whether you have enough savings to take care of the upkeep of the house; during the period where no tenants occupy your home, among a hoard of other things.
After reading upon the risks, advantages and disadvantages of buying a property to let, if you are convinced that this investment is the right way to use your money, only then go ahead with the plan. Let me give you an example, in the UK many people were unknowingly sold PPI policies along with loans or mortgages. Now, since most people were not aware of PPI being added to their financial agreement, they were paying premiums for a policy they did not want. (P.S.If you think that you were among the many who were mis-sold PPI, then its best to check now as a deadline has been imposed on refund claims.) Similarly if you don’t the proper research or if you don’t check your financial agreement with a fine tooth and comb the chances of you being mis-led are high.
Selecting the area
Once you decide to buy a buy to-let property, the next step involves choosing a prime location. However, the process of choosing the right area for you to buy a property in, is not all that simple.
Before choosing a locality, you must decide, who do you want to let your property to? A family, college students, or young professionals? This choice will further contribute many factors, and will influence your choice of a location.
For instance, if you are willing to let your property to a family, you select an area that has good schools for primary education, has a safe and friendly neighbourhood, is at a reasonable distance from the market, as well as is easily accessible through all means of commute.
Whereas, if you decide that you want to let your property to young professionals, you must choose a locality which is considered to be one of the trendy parts of the town, is reasonably closer to the cluster of corporate towers, and is fairly easy to commute to and fro from.
Lastly, if you wish to let your property to college students, you must choose an area that is fairly close to the university campus, where the neighbours would preferably be other college students.
Apart from the aforementioned points, you must also keep in mind to not be afraid to explore areas and localities beyond your city, to invest in. You will be surprised to find the difference in property rates, as you move from one area to another.
Inquire about Buy to-let mortgage
Once you have your finances in place, have decided upon the area where you want to buy your buy to-let property, and maybe have already looked at a few properties, it is now time to research about the various options that are available to you, when it comes to buy to-let mortgage.
It would be unwise to walk into a bank and take up any buy to-let mortgage that the bank has to offer. You must research about the various options available to you, before deciding upon the bank, or the type of mortgage that you would like to sign up for.
An alternate option would be to hire an independent broker, to help you sift through the various options. The broker cannot only guide you about the deals available, but can also help you decide upon an option that suits your needs the best. However, it is always good to read up on the subject matter, before getting into a discussion, so that you can make an informed choice.
Buying the right property
Once you have done your research and selected the right mortgage plan for yourself, the next step is to look for properties. As we have already discussed earlier, what importance does the locality has, let us now discuss the type of property you should look for.
Once again you would have to consider the type of tenant you would like to let your property to, before deciding upon the type of the property. For a family, a traditional home would be suitable, while college students would feel the most comfortable in a hassle free place which is easy to clean, whereas, young professionals would prefer a more contemporary home.
It would also prove to be an advantage for you if you buy a property which is relatively in a dilapidated condition, this way, you could easily haggle over the price, and possibly sell the property for a higher price, after some reparations. However, you must keep in mind that the damages done to the property should be easily reparable, while the foundation and the basic structure of the property must be in impeccable condition.
You must also study the market and the owner of the property before negotiating the price, for instance, if the area has a reputation for low sale of properties, you might be able to negotiate a lower price, similarly, if the owner of the property has owned it for a long time and is now selling it, will accept a lower price than a family who is selling their home and moving onto a next one.
The steps to finding a tenant
After buying a buy to-let property, you would want to let it to tenants, as soon as possible, because the longer the house sits vacant, the more it will cost you. However, the process of finding a tenant also has some nuances.
You must decide whether you want to take up the responsibility of finding a tenant and letting them your apartment on your own, or whether you would want to hire an agent to manage all this for you.
While an agent will charge a certain amount in fees, they will take care of all the steps, right from finding a tenant, showing the prospective tenants your property, getting the tenant agreement forms signed, taking care of the issues that the tenants face, to providing a plumber, electrician or other help, if the need arises.
On the other hand, if you decide to handle the process on your own, you will have to sacrifice your evenings, weekends and holidays to viewings, managing the prospective tenants, arranging the tenant agreement forms, helping the tenants accommodate, and helping them in case an issue arises.
Whichever road you choose to take, be sure to make a decision where you are familiar with the pros and cons.
Another crucial step that you must take, is to visit the tenants every six month, with prior notice of about a week or two. The regular visits will not only help you keep a check on the well being of your property, but will also help you maintain a relationship with your tenants. This relationship with your tenants, proves crucial because neither do you want your property to sit vacant, nor do the tenants wish to keep moving from property to property, hence this amiable relationship proves to be a win-win situation for both the parties.
By taking care of your property and your tenants, you will not only ensure that the tenants take care of you, but will also ensure maximum returns on your investment. The erratic property trends may trouble you, however, being informed and pro active pays off in the long run.
