The buy to let market continues to grow with a constant flow of newbie landlords considering investing for the first time and with interest rates so low many existing landlords are considering buying additional buy-to-lets to add to their property portfolios.
So what would are my top tips for investing in a buy-to-let.
1. Research, research research
Let's start with the well warn cliche, but for good reason. I can't emphasise enough the importance that investors should attach in researching an investment. Buy right for a great, relatively hassle free investment that will stand you in good stead for many years. Buy the wrong property in the wrong spot and you could spend your days desperately trying to fill your property and then be faced by one set after another of bad tenants reaping havoc with your life and property. Check out the 3 pillars of buy-to-let.
2. Find the property yourself!
I know there are scores of companies out there that profess to be able to find you the perfect buy-to-let investment. My advice is simple, give them a wide birth! Think about it. If a property investment is so good and these people are truly experienced property investors with 'thousands' of buy-to-lets ‘why oh why’ are they passing the details on to you rather than snapping up the investment themselves? Could it be that the investment isn't that great and that actually they are getting a big cut from somebody to sell you the duff property. I think very much yes. I'm afraid there is no shortcut to finding a good investment property. See point one and do yourself a favour and find it yourself.
3. Think about buying at a property auction
Property auctions can be great places to bag a bargain property. Follow these basic steps and you could find yourself a perfect buy-to-let property at 20-25% less than the price you might have to pay on the private market. Remember though, just because it's at the property auction the selling price won't necessarily be cheap. The other tip is that just because a property is cheap it's not always the best buy-to-let property to buy if you want to have a hassle free let.
Many newbie landlords have no idea how much they should be paying for things like mortgage advice or landlord insurance and as a result many get stung by unnecessary charges and over pricing. Buy-to-let investment is a one of those strange areas where a small business meets investment, and because it involves sums of money that many of us don't deal with in our every day life it is very easy to splash out a few hundred here and a few thousand there because you are told you need to. DON'T! It is possible not to pay a BTL mortgage brokers fee at all when obtaining your mortgage.
5. Understand the figures - the power of the yield
A buy-to-let investment should be made with an understanding of the risks, rewards and returns. These are all reflected in the yield of any investment property. Make sure you understand rental yields and what you are investing in before you put your hand in your pocket.
6. ‘Refurbs’ are king
I'm a great advocate of buying properties that are wrecks and then doing them up yourself; either by doing the work yourself or in my case, managing much of the ‘refurb’ work through sub contractors. Why? If you buy right you should be able to make 10-15% profit on your refurbishment of the property. On a £100k property that equates to £15,000.. This equity can then be recycled as your deposit when your remortgage on the BTL loan.The other advantage to you is that you get a fully refurbished property where you know that all the work has been done properly.
7. Cheep & cheerful
When you look to kit out your property either as a ‘refurb’ or just fitting carpet and toilet accessories remember you don't have to spend a bomb to make it look good. Discover the likes of Wilkos and Ikea to get the place kitted out on a ‘shoestring budget’ but still looking stylish into the bargain.
8. Let right!
A tenancy can be straight forward i.e. you get a nice tenant in. They rent your property and pay you rent on time and you have a nice relatively stress free life. However, get it wrong and get the WRONG tenant in and you will feel like torching the place before long. What is essential is that providing you have followed my guidance in step one and brought in the right place then you WILL get a good tenant in. Don't panic and just accept the first one through the door even when you know they just ain't right. Be patient!
9. Carry out the proper checks
Bad tenants can be avoided. You just have to make sure you carry out the right checks. Essential is a basic credit reference, which should tell you that your tenant is not a serial debtor. I would always advise that you also obtain the prospective tenants last 6 months bank statements to ensure that they are solvent and not up to any dodgy spending. If they say no. then they probably have something to hide. If the tenant doesn’t have a full or decent credit history make sure that you get a guarantor for your tenant who does!
10. Manage it yourself
If you do go ahead and buy a buy-to-let; remember you don’t need a letting agent.
They can be useful for the initial letting or where you live a long way from the property but generally there should be nothing stopping you managing your own buy-to-lets. Property Hawk has all the tools including advice and tenancy agreements and all the landlord forms you need to manage your property including free property management software. Why spend 10-15% of your gross rent on a service that you can do yourself. I guess ultimately the thing to remember is “If you hate tenants that much, maybe you shouldn’t be considering being a landlord.”
If you have any thoughts or comments on the issues raised by this article please add your comments below.