Buy to Let Advice Guide
The buy to let market can be seen as good investment arena, however like with any investment it pays to follow some guidelines.
Many people who enter the buy to let market see it as a long term investment, with intention to see growth in equity on the buy to let property portfolio.
Knowledge is Power
Having the right information about the buy to let market will put you in a good stance. Speak to buy to let agents who can give you their take on the buy to let market. Read the latest literature on buy to let mortgages that is available from industry governing bodies such as the council of mortgage lenders. They often publish guides that can be quite useful for the consumer. If you have friends, colleagues or family who have had experience with buy to let properties then it would be advisable to learn from their experiences. Find out how they went about it, the problems they faced etc. The internet has a vast amount of information on buy to let mortgages so make sure you use it!!
Make your investment worth it
Don’t forget this is not a residential property for yourself it should be seen as an investment. The rentability factor plays an integral part in your investment; if the property strikes appeal with your tenants then you are onto a winner. Think about the location of the property. Is it easily accessible? Does it offer private parking or is it off road? Are there schools in the area?
If the property or area is close to a university or college then your focus may be to cater for the student market and ensure your rented property caters for them. Which ever option or type of tenant you are looking for make sure the area suits their profile.
It may be worth a visit to the letting agents and estate agents to help you understand the area you wish to find a property in as well as the investments involved.
Another natural reaction people have is to find a property near to their own residence, maybe this is more comforting as they know the area, but limiting yourself to a geographical location could impact your investment return. It is quite common for your buy to let portfolio to have properties located across many parts of the country. If you cannot manage a property that is far away from then consider employing an agent who will ensure the property is managed for you, with a fee of course!
One of the common mistake people make is spending time and effort searching for a property and only to realise that they simply cannot afford it. Therefore, it would be wise to see what you can afford before hand and what the rental property is likely to give you on a monthly basis. You need to bear in mind that buy to let mortgage providers would require your rental income to be greater than the monthly mortgage payment. This ratio is often around 125% of the monthly mortgage repayments. In addition, a lender will require some form of deposit for the buy to let loan, again this can vary between 10 and 20 per cent.
Finally, ensure additional funds are available for corrective work on the property to ensure it is fit and suitable for renting. Sometimes you may have to carry out additional work that needs to meet specific legal requirements depending on who you are renting the property to. If you decide to rent the property to students then take into account the periods the property is not occupied. For these vacant months you will be liable to continue making mortgage payments even though you have no rental income.
Get the best deal
The buy to let market is competitive and represents a considerable part of the whole market. As a result, competition is higher and the types of products and services available are more diverse. The consumer now has much more choice and availability, by simply visiting the high street you will notice different interest rates. The internet has allowed people to find the best deal with out leaving their home, complete a simple application form and the whole process is underway. Many customers have found the internet as a place to find the best deals as on many occasions loan providers offer special internet rates that are not available elsewhere.
No Chain No Pain!
In a buy to let situation you are not in a buying chain as you are not selling a property, therefore your bargaining position becomes much stronger. Don’t be shy to ask for better prices, some sellers will happily accept offers for the ease of a quick sale.
Prepare for the worst
No one likes to think of the worst but the reality is that it can happen. Ask yourself what if the market takes a serious fall and if you can sustain your levels of investment.