It’s a time of change and controversy in the buy-to-let sector, with many new regulations, tax changes and forthcoming legislation to consider. So can you still be successful in buy-to-let?
Definitely! Property offers some of the highest and most stable returns of any investment, and demand for rental property looks only set to increase further.
If you’re starting out on your buy-to-let journey, there are some tips and tricks that you should know.
We asked Landlord News to put together their top tips for landlords on being successful in buy-to-let:
Know the market
Before you let a home to tenants or even purchase a buy-to-let property, you must understand the market you’re buying in. It can sometimes be easier to invest in the area that you live in; you’re more likely to know the market and will be close to your properties in case something goes wrong.
However, you may find that rental yields aren’t strong in the area that you live, or house prices have soared recently. It could be more financially viable for you to invest somewhere else, where you know you are guaranteed strong rents and can purchase a property for a reasonable price.
Whichever option you choose, research the market thoroughly before deciding to buy a property there.
Target the right tenants
You may already have the type of tenant you’d like to let to in your mind, but remember that there must be strong demand for this kind of renter in the area you purchase a property, and the home you invest in must be suited to their needs.
For example, if you want to let to young professionals, then you know you’ll need a one or two-bedroom modern flat. If you’re interested in the student property market, then a larger, converted house is a better option.
It’s also essential that the location attracts the type of tenant you’re looking to market to, as you want potential demand to be high, to ensure you achieve the best price possible.
Work out the numbers
Before you purchase a buy-to-let property, you’ll need to decide whether you’re investing as a cash buyer or with a mortgage. This will determine whether you have monthly mortgage repayments to consider, which will affect your expenses each month.
You should also calculate your potential rental yields – that is, your annual rental income as a percentage of the price you paid for your property. The strongest yields come from paying a low price for the property, but receiving high rents every month. This is why it’s essential to invest in a market with high demand.
You should always make sure that you will be able to make strong returns from your investment. It is wise to consult a financial adviser to explain whether you will be successful in buy-to-let.
Decide whether to use a letting agent
Once you have purchased your property, you should decide whether you want a letting agent to manage it for you. There are different packages available, but a letting agent will typically find tenants for you, complete referencing on them, conduct periodic inspections, and undertake the check-in and check-out processes.
If you do decide to go it alone, you should be sure that you have the time available to commit to all of your responsibilities. If not, you may find that you don’t secure reliable renters, suffer long void periods, or even breach the law.
If you’re not comfortable with the lettings process, it is a good idea to instruct a letting agent. Nevertheless, you should always check that your agent is completing their duties to the appropriate level. Letting agents can charge quite steep fees for their services, usually as percentages of the monthly rent of the property, but there are other solutions on the market, such as Howsy, which charges a flat fee of £45pcm per property in London and £35pcm anywhere else.
Choose the right insurance
Once you start letting to tenants, you should make sure that your property is protected against loss or damage. A good Landlord Insurance policy will not only cover you for accidental damage, but also for malicious damage caused by your tenant and theft by your tenant. As a landlord, it’s essential that you have these covers in place, so always check your policy.
You may also want to consider Rent Guarantee Insurance, which protects your rental income against tenant rent default. This means that you will still get paid if your tenants stop paying the rent.
Failing to protect your investment could leave you out of pocket, so ensure you’re covered for any eventuality.
Stick to the law
There are now countless rules and regulations governing the private rental sector. It’s your job as a landlord to keep up with them and make sure you’re sticking to them. They range from gas safety to energy efficiency, so don’t get caught out.
If you are worried about missing something and being hit with a potential fine, it may be wise to use a letting agent to manage your properties instead (as mentioned above). This way, you should be able to rest assured that all of your legal obligations are covered.
Those that go it alone should remain organised and dedicate time regularly to ensuring all regulations are complied with.
Secure good tenants – and keep them
Having good, reliable tenants in your property can make or break whether you’ll be successful in buy-to-let. You rely on these tenants to pay you rent every month and look after your property while they’re living there. Securing good tenants at the start of a tenancy should mean that they live there for the long-term, which will give you a solid flow of income for the foreseeable future.
In order to keep your tenants for the long-term, you should always act responsibly, be approachable and flexible with your terms. While this should go without saying, simply being friendly will make your tenants want to stay in your property for longer.
You should try to make their stay in your property as pleasant as possible, so easing up on certain requirements (such as allowing them to have pets), may be the key factor in them staying for longer.
While investment is completely subjective, being successful in buy-to-let depends on some key factors. Although your own circumstances could change at any moment, following these top tips should put you in the right direction for a fruitful buy-to-let journey.