Getting started with buy to let requires a lot of forward planning and some knowledge of the housing market, but with that little bit of expertise it is possible to begin to build your buy to let empire; whether you want that to be one property or one hundred properties.
With the below tips, we’ve created a simple road map to lead you towards buy to let success.
The maths and the mortgages
It sounds a boring place to start but good maths and a good buy to let mortgage are the foundation of a profitable buy to let property.
In terms of the property, you need to be certain that your rental income will allow you to make a profit and in terms of the mortgage, you need to be certain that this can be acquired at a rate which will not erode all of the profit you planned for above.
Buying a property and expecting to rent it out automatically is poor planning and a very risky route to market.
Do you want to rent to a young couple? Students? A family? Do you want to rent short or long term? All of these factors should define your area, costs and tenants. Make sure all of those things marry up, before you commit to purchase.
Buying or developing?
Buying to let and developing a house to become a buy to let can be two very different things and they definitely have two very different cost bases.
Buying to let is normally an investment in property which is ready to go to the lending market, whilst properties which need development can take much more time before they are ready.
There are also potentially different finance and mortgage solutions available for both, so be certain which you want to pursue and plan accordingly.
Always remember costs
When investing in property in any way, particularly in the tight margins of buy to let, you need to make sure you have factored in all of your costs.
The most common in the buy to let market are agents fees, mortgage costs and upkeep. Your rental homes will require investment over the years so make sure that the new carpet isn’t going to erode your profits. If you want to minimise upkeep costs, consider a newer house or flat for your first purchase.
The ‘two-month’ rule
A popular way to estimate return and plan for unforeseen circumstances is to complete your finances as if the property was always going to sit empty for two months each year. We all like to think that that scenario won’t happen but if it does, will the property still be profitable? Beyond that, will the property still be affordable?
Even if you’re starting out with buy to let, don’t forget that you are in a strong position price wise when it comes to acquiring the right property: exactly the same position as a first time buyer, in fact. Make sure you bring that up, when it comes to settling on final price!
Your property may be repossessed if you do not keep up repayments on your mortgage.