Joining the already bustling train ride that is buy-to-let can seem quite appealing to any new investor, especially as the market seems to be on the up again in various parts of the country. Investors are always looking for ways to make a healthy profit without having to rely on the unreliable methods of the stock market and property is probably one of the most popular options available. Buy-to-let is something that investors have embraced over the last few years, but it’s important to remember that there are plenty of ways you can trip yourself up when it comes the decision making process. Newcomers will always be threatened by potential hiccups, so here are eight tips the experts would suggest for anyone considering buy-to-let in the near future.
1) We all dream of living somewhere with period features that’s grade 2 listed, but in reality it’s not something you want to be looking out for when you’re thinking about buy-to-let. Remember that you’re pursuing a business deal, so any personal feelings towards a house shouldn’t have an effect on the decision you make. At the end of the day, you’re not the one who’s going to be living there, so make sure you look for something that’s reasonably new and in good condition. The newer the property, the less you need to worry about maintenance further down the line.
2) As harsh as it sounds, run-down areas correlate with the sort of tenants you aren’t really looking to attract. With this in mind, it’s a good idea to focus your attention elsewhere and avoid areas that aren’t in good shape themselves. It has been proven that there is a connection between unreliable tenants and run-down areas, so keep this in mind when choosing a specific part of the country to purchase a buy-to-let property or perhaps start a chain of buy-to-let projects.
3) Once you jump into the property market, you’ll notice there are various different kinds of properties you can invest in, from two bedroom country bungalows to modern five bedroom detached houses. It’s vitally important that you realise there are certain properties that are more “lettable” than others, with two bedroom apartments and flats proving to be one of the most popular letting opportunities. Remember that the vast majority of people looking to rent will be struggling to get on the property ladder themselves, so large family homes won’t attract as many tenants.
4) It’s much easier to purchase a property as someone who isn’t involved in a chain, which is anyone who is looking to invest. This is an attractive proposition for sellers who realise they don’t have to rely on you selling a property before you can buy, so they’ll be more than happy to enter negotiations with you ahead of anyone else. This gives you the freedom to be a lot more ruthless with your valuation of a property, giving you the chance to strike a good deal. However, patience is a worthy alternative, with so many other sellers around to choose from.
5) A lot of people rely on letting agencies to look after their property and you may have decided the same. If you have, don’t rush into things by joining up with your local agency. Instead, try and play multiple agencies off against each other to get a good deal. Unlike in the old days, you no longer have to pay a substantial amount of your monthly income to letting agencies, so make the most of what you get today and do some research. If you’re desperate to save as much as you can, you could potentially look into running the property yourself, depending on your situation. It’s possible; just make sure you do everything by the book!
6) Maintenance work is reasonably commonplace for any buy-to-let investor and your letting agent is responsible for this (if you have one). What you need to watch out for is any additionally fees that they decide to throw on top of the standard monthly payments that you make, as these shouldn’t have to apply. Remember that what they get every month from the rent should be enough to cover any issues the property encounters. To stay organise and cope with other potential issues such as tenant changes or further maintenance, agree an admin fee from the begi9nning and make sure they stick with this.
7) Try not to restrict yourself to somewhere you’re familiar with, as this could prevent you from finding some particularly lucrative investment opportunities. Remember that there are much more important things to think about when choosing an area to invest in, such as whether or not it’s run down or not, its transport links, local retail stores and the community. Also, rental yields differ across the country, so you might be passing up the opportunity to get more from your investment. If you live in large town that is pretty expensive, try looking a few miles down the road for smaller towns and villages with cheaper property prices. Locations like these are great for investment, with excellent average rental prices.
8) Finally, and one of the most important tips of all, is making sure you don’t give away your appreciation for a property during a viewing. It’s something that should go for any type of business deal, from viewing a house to buying a car. If you’re overly enthused by a property, it can cost you dearly when it comes to putting in an offer. Not only will they push you harder in negotiations, they may even increase the sale price. Lower offers are far more likely to be accepted if you stay calm and act as if you haven’t fallen in love with the place!
Over the years Mike James has accumulated many years experience working in the real estate industry both in the UK and abroad. He enjoys taking on housing projects in need of renovation and work and doing them up to release back on to the lettings market. He writes about his experiences and other relevant topics for Property Frontiers, an independent property consultancy.