1. Research the location
When selecting a location for your buy to let property make sure you always research the 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. It is also always a good idea to take a look at recent comparable sales and rental achievements.
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. Define the tenant profile
When thinking about how to buy to let, think about who your tenant is likely to be (a family, professional, students, etc.) and present the property accordingly. Don’t produce a five 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 final rental return. Having said this, mod cons such as Wi-Fi can help secure the right tenant.
If you think the property might be classed as a House in Multiple Occupation (HMO), make sure the property has a license to operate from the local council. You will not be able to secure finance on the property without it.
3. Talk to a specialist broker
When researching how to buy to let it is vital to talk to someone that has a deep understanding of the buy to let mortgage market. Some buy to let mortgages are not available on the high street, so to ensure you get a complete picture of the finance options available you should consider using the services of an independent specialist mortgage broker who has access to the whole market - you can call us today on 0845 345 6788.
Due to their business volumes and longstanding relationships with lenders, specialist brokers often afford their clients preferential processing treatment on mortgage applications. Remember, unlike home-owner mortgages, buy to let mortgages are not regulated by the FCA, so make sure that you use a broker that is a member of the National Association of Commercial Finance Brokers.
Residential property investment is not a get rich quick scheme. It is a medium to long term investment strategy and a good broker will help you to consider all the potential costs in order to forecast your return on investment. Costs can include:
- Mortgage application booking fee
- Property valuation fee
- Legal fees
- Tenant reference check fee
- Property maintenance
- Tenant void periods
4. Decide whether to self-manage or use a letting agent
Another thing to consider when researching how to buy to let is whether to use the services of a letting agent. Not only can they advertise your property for you, they can also manage the property. Of course there are pros and cons of managing the property yourself or using a letting agent, so you need to way up these options.
If managing the property 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 properties themselves invest in their local vicinity and are generally on call 24-7. If you are investing outside of your area, using the services of a letting agent may be a better option but do make sure you understand all the fees involved.
Unlike estate agents, letting agents are not regulated, so do make sure you use one that is signed up to ARLA.
5. Check out your tenant
In the current climate it is more important than ever to undertake credit reference checks on new tenants. When learning how to buy to let, simply hoping that the prospective tenant will pay rent on time doesn’t make sense. Tenant referencing checks can cost less than £10 per person. You should also ask for an employer’s reference.
6. Protect your tenant’s deposit
If you take a deposit from a tenant on an assured short hold tenancy agreement, the law in England and Wales states that you must protect it with a Government authorised tenancy deposit protection scheme, within 14 days of receiving it. Failure to protect the deposit could result in you having to compensate the tenant with up to three times the amount of the deposit and you may not be able to regain possession of the property.
7. Maintain your property
It’s all too easy to hold back on maintenance when cash flow is a bit tight, but how your property looks really does play a big part in securing new tenants and ensuring current tenants renew their contracts.
When buying a flat ensure that there are no outstanding maintenance issues, or unpaid service charges.
8. Get proper landlord insurance
Landlord insurance is designed specifically for rental properties, covering circumstances that would not be covered by normal household insurance. In addition to the usual perils that our covered by standard buildings and contents policies, specialist cover for buy to let properties includes protection from the sort of damage or losses that can arise if you are unfortunate enough to end up with problem tenants.
If you own multiple properties you could save money using an insurer that will provide cover for all properties on a single policy.
9. Keep accurate records
It is important to keep accurate records for each rental property you own. A simple spreadsheet will do, but if you have lots of properties you may be better investing in specialist software or employing the services of a bookkeeper. Don’t lose out on tax breaks by being tardy on your paperwork.
10. Join an association and get accreditation
It can be a lonely business being a landlord, particularly if you are managing your rental property. You can get support and training from joining a landlord trade body such as the National Landlords Association (NLA).
Even better, why not get accredited status? It could mean the difference between a prospective tenants choosing your property over another. Landlord accreditation schemes aim to help landlords operate a successful business and safe-guard tenant interests. To gain accreditation, contact your local council for details.
We hope these tips provide a useful starting point when researching how to buy to let. Of course, if you need help with a buy to let mortgages, please don't hesitate to contact us on 0845 345 6755. Our experienced and qualified mortgage brokers will be happy to assist.