Top 10 Buy to Let Tips

Below we have compiled our Top 10 Buy to Let tips that we feel should help you in your Buy to Let endeavours. These Top 10 Buy to Let tips will provide you with a list of things to consider when taking on a Buy to Let property - we hope that you find them useful and help you to avoid any unwanted surprises!

Top 10 Buy to Let Tips - Quick Links

1. Do Your Research

Always research an area thoroughly before choosing to invest. The local amenities, transport links, schools etc will all have an effect on the value and rental demand for your property. Research also recent comparable sales and rental achievements and beware of discounts being offered by developers looking to offload new developments. Remember that any supposed discount offering is being put to you by someone who stands to benefit from such an exercise and therefore will be ignored by all lenders in the current market. Off plan buying has its place and its time but not just now.

2. Tenant Checks

In the current climate it is more important than ever to undertake credit reference checks on new tenants. Simply hoping that a prospective tenant will pay rent on time doesn’t make sense. The cost of tenant checking has more than halved and with some web sites offering this service for as little as £10 per tenant, it could prevent you from signing up a nightmare tenant.

3. Property Maintenance

It’s all too easy to hold back from maintenance when cashflow is tight but how your property looks is the difference between tenants renewing or signing that first lease. When buying a flat ensure that there are no outstanding maintenance issues and unpaid service charges. Many owner occupiers don’t challenge landlords service and maintenance bills, use your knowledge of property (and costs) to ensure that these are fair, reasonable and actually get done.

4. Self Management or Letting Agent?

You need to way up the pros and cons of managing the property yourself or paying a Letting Agent to manage it for you.  If managing yourself you need to ensure you have the right skills or at least the right contacts and support to ensure that things get done quickly and efficiently. The majority of landlords who manage and maintain the properties themselves invest in their local vicinity and are generally “on-call” 24/7. If you are investing outside of your area then a Letting Agent may suit.

5. Review Letting Agent Fees

If choosing a Letting Agent make sure you do your research on fees and service. The enthusiasm and gratitude to your letting agent for getting you a tenant will soon fade as realisation dawns that you will be paying further commission if the tenant remains in your property on subsequent lease renewals. Whilst there may be some work involved in this process, you should ensure at outset that you agree appropriate commission levels on tenancy renewals. You don’t want to be paying a month’s rent out needlessly.

6. Property Finance

Seek advice around the finance options available. Many landlords borrow high loan to values (LTVs) to accelerate growth of their property portfolio. Currently for some, being on a lender’s reversion or “back book” rate can be very attractive until they want to raise additional funds for new ventures. Others decided to take Buy to Let fixed rates to protect their cashflow now find themselves paying high rates and should re-finance whilst rates are lower to lock into better mortgage offers today. Specialist brokers will have up to-date rates and product offerings on their web sites.

7. Target Your Tenant Profile

Think about who your tenant is likely to be (family, professional, student etc) and present the property accordingly. Don’t produce a 5 star property where the local rental market only requires student accommodation. Not only will you have spent too much money on the final product but you are unlikely to get a higher rental return. The question of whether students will respect and maintain the property better than any other tenant profile is of lesser importance. Mod cons such as Wi-Fi, broadband etc can also help secure the right tenant.

8. Landlord’s Insurance

Ensure you have the appropriate Buy to Let insurance for the property. Premiums for Landlord’s Insurance are currently soft so on renewal surf the net for a robust policy that fits your needs (say 13p per £100) – you should be able to pay on-line and download full policy documents. If you own multiple properties it is worth putting all the details onto a spreadsheet and send it to a broker to look for a blended cheaper rate.

9. Sale and Rent Back

If you are involved in Sale and Rent Back (SRB), ensure you are up to speed on new legislation. The newly introduced legislation means that any change to the lease terms would result in a landlord becoming a SRB provider for which interim authority would be needed except that the Financial Services Authority (FSA) will not issue any further interim licences until full rules are introduced in summer 2010. If in doubt of where you stand on a SRB property you should get legal advice before modifying lease terms.

10. Record keeping

It is important to keep accurate records for each property. It’s so tempting to pay bills and pile up agency statements on each property – either have a proper system that records all transactions relating to a property or employ a bookkeeper / accountant to whom you deliver the paperwork regularly. HMRC is facing a period of declining revenue and the property sector is perceived as an area where they can see some soft targets – don’t lose out on tax breaks by being tardy on your paperwork.