1/ Do Your Research – If you are new to the buy to let market, find out as much as you can about it. Talk to current or previous landlords and find out about their experiences. If you have the 25% deposit that will almost certainly be required, research whether your money would be better off in other investments such as high interest savings accounts. Bear in mind that your capital will be tied up in a property which may fall in value. Remember 2008!
2/ Location Location Location – Part of your research should include the location of the property you wish to buy. Are you going to be ‘hands on’? If so you will probably be limited to purchasing a property close to where you live. If you are going to let through an agent you are not limited by geographical location and the agent will undoubtedly have a number of contacts for maintenance, gas fitters, electricians, locksmiths etc.
3/ Do The Maths – As well as a 25% deposit, lenders will generally want the rental income to be 125% of the mortgage payment. A one bedroom flat in Wales will generally have a better rental yield than a similar property in London, rental yield being the rent as a percentage of the property value.
4/ Choose Your Mortgage Carefully – A lot of people still see going to their own bank as the solution for their mortgage needs. Bear in mind your bank will only offer you their own products. Go to see a ‘whole of market’ mortgage broker for the best deal. The best deals sometimes come with relatively high fees but a qualified broker can advise you on the ‘swings and roundabouts’.
5/What Type Of Tenant Would You Prefer? – If you are buying in a University town, you will generally have no problem renting to students. The place needs to be easy to clean and doesn’t need to be too luxurious. A property located on a commuter belt with good transport facilities will appeal more to the professional so the property would need to be modern and stylish. A property close to schools and amenities would appeal more to a family who would probably prefer the property unfurnished as they generally have their own furniture etc. Remember, allowing tenants to stamp their own mark on a property such as decorating to their tastes will generally make them feel at home and it follows that they would want to stay longer.
6/ Do Not Over-Commit Yourself – Going back to the maths, assume that your property could be empty for 2 months of the year. Could you still afford the mortgage payments?
7/ Renovating A Property – If you are prepared to take on a tired or mildly dilapidated property it could add value to your investment. Work on the property developer’s principle that the value of a fully refurbished property should be the cost of the property plus the cost of the work plus 20%. Be aware though that if a property is very run down, you may not be able to get a mortgage.
8/ Be Ruthless When Negotiating – The fact that you will not be in a ‘chain’(you aren’t reliant upon having to sell your house in order to buy another) means there is little chance of your purchase falling through so make low offers. Bearing point 7 above in mind, remember cash is king. If you are fortunate enough to have the full amount and are not dependent upon a mortgage and there is no chain, this puts you in a very strong position to negotiate.
9/ Working Capital – You should bear in mind that you will need enough money in the bank to cover eventualities such as a boiler breaking down and the need for a new one if necessary.
10/ Choose Your Insurance Carefully – Here at CompareCrazy our panel of brokers are leading experts in the buy to let insurance field. Whilst it is imperative to have a suitable buy to let insurance policy which includes landlord liability cover, you may wish to consider add-ons such as rent guarantee insurance and emergency boiler breakdown cover, all available at discounted premiums through CompareCrazy.com. The business insurance comparison site!
