Buy-to-let property investment has been big news for some time now, with private landlords now owning almost one out of five homes in Britain. Many investors have seen extraordinary returns on their investments and the property market in the UK keeps on going from strength to strength, making it a tantalising prospect for those on the outside looking in.
There are, however, a number of things that investors new to the property game should bear in mind prior to jumping in feet first. Here we aim to give you some sound advice that should stand you in good stead if you are looking to join the legions of landlords making money from property in UK buy to let deals. Lets take a look:
1. Keep borrowing in check
Whilst borrowing money via a buy-to-let mortgage can actually increase your income overall, it does come with a degree of risk. Keeping your mortgage manageable will take much of the stress out of your investment and allow you to enjoy the process rather than leave you burdened with worry. Many services offer a mortgage affordability calculator to help you estimate how much you can afford to borrow, helping you to stay within your means.
2. Know who you are renting to before you buy
Researching the rental market in your chosen area and selecting a property according to the type of person likely to rent it will give you a far greater chance of success over the long term. For instance, if the area you are looking at has a great university nearby, then maybe a property fit for students would be your best bet. Or does the area have great transport links into a financial district such as London or Leeds? Then maybe you should concentrate your efforts into finding a property that would suit young professionals. While this may seem obvious, it is surprising how many investors neglect this stage.
3. Concentrate on rental income, not capital growth
Capital growth may well be the end goal, but rental income is the important figure to concentrate on as it is this that will help to get you to where you are heading. Without decent rental income you may struggle to maintain the property sufficiently and even, in extreme cases, be forced to sell far earlier than you would have hoped. If this happens, the likelihood is that will not have hit the capital growth target that you set for yourself, and you’ll have wasted a lot of time, money, and effort. Better to get it right first time.
4. Don’t scrimp on essentials
No matter how tempting it may be to cut corners and do without it, things such as landlord insurance are essential to your success. Should the worst happen and you wind up with a tenant from hell, you can seek peace of mind by ensuring you have a good landlord insurance policy in place. Some policies will offer thousands of pounds worth of contents cover, as well as accidental damage cover and will also allow you to claim back loss of rent as a result of fire or flood – example here.
5. Know the importance of keeping good books
Bookkeeping is another essential that catches a lot of first time investors out. Failing to keep proper records can result in a heftier than expected tax bill, something that everyone naturally wants to avoid whenever possible. Thankfully, you do not have to be an accounting genius to stay on top of things these days, as there are numerous software packages on the market aimed solely at landlords.