BTL Tips

Property has always been a long term investment, especially when interest rates are low and stock markets are in turmoil.

Due to current financial problems buy to let is not as easy as it was just few years ago.
In the current market conditions it is very important to do your sums before getting into buy to let venture.

Choose location of your property very carefully. Right location can make a difference between success and failure. Do not buy in the area you like, you are not buying a property for yourself; you are making a business decision. Buy in the area which will allow you to maximise your rental income and will let you see your capital grow.

Choice of property will depend on requirements of your tenants and you should try to identify your ideal tenants.

Research your local market. Speak to a letting agent and try to establish where you will find a good rental potential and what current demand is. Tenants tend to like secure areas with availability of public transport, good road access and local facilities.

Different tenants have different needs. You may do well with a flat in a city area or a house in the countryside, but think why it would appeal to your tenants. Students tend to look for a place near their university, good schools are important to families with children, but if you are thinking about pretty cottage on the middle of nowhere you need to know who will rent it.

You can get good yields from renting to students, but are you prepared to deal with all potential problems? Also you need to remember that you will have to apply for a licence for houses in multiple occupations. Many landlords try to market their properties to professionals with steady jobs. When you decide to target this segment of the market, make sure that your property is decorated and equipped to a high standard as their expectations are high, but don’t overdo it as rent may not cover your costs.

When you are looking for a buy to let mortgage, try to find the best deal available on the market. Buy to let mortgages have become much more competitive in recent years and you should be able to find one which will suit you. Try not to borrow too much as you have to take into account that property prices can go down as well as up.

While demand for rental property is very high in the UK, local demand can fluctuate depending on local economy. Some places can be more susceptible to changes than others as for example once popular area can become derelict if large business will decide to relocate or close.
Try to anticipate potential problems. You need to have some cash a side as property can be empty for few months in a year, but mortgage payments will still be due, house may require repairs and mortgage payments can go up if you are on a variable rate.

When calculating your budget take into account all costs, such as buy to let mortgage payments, letting agent fees, service charges in case of a leasehold, stamp duty, cleaning, gas and electricity safety certificates, redecorating, replacing appliances and furniture, taxation and other which may be relevant.