The property market is a scary! Yet with low interest rates and a rise in the number of property rentals, the current economic climate offers an income opportunity in the buy-to-let market.
However, for success in buy-to-let you need to know your onions. Use these 7 tips as your guide:
1. Manage your borrowing
Of course there is a risk involved with borrowing for buy-to-let, but there are fruitful returns to be had too particularly in the more lucrative areas. For Letting Agents in Southampton business in booming with rental yields in the city being among the highest in the country. With interest rates low your return will be greater on a 75% mortgage with a rental income than the interest you would receive on your deposit being in a savings plan.
2. Know your audience
Know the level of tenants you are aiming at and consider this when purchasing the buy-to-let property. For example, two bedroom houses are very popular with young professionals who are renting whilst saving for a mortgage, hence this level of property has a captive market.
3. Don’t bank on a rise in property value
The property market has slowed down over recent years. The days of buying a property for a quick turn around to make a profit on the properties increase in value are long gone. Even if the property has increased in value, once the capital gains tax has been paid the return would be slim. For success in buy-to-let focus on a income from your rent. In this short video Brian Linehan, of Belvoir Lettings Agent in Southampton, explains that buy-to let is a safe but long term investment NOT a way to make a fast buck!
4. Make your rent your return
Focus on cash flow! Make sure you rental income covers your mortgage repayments and all other costs. Leave enough margin to ensure you can cover any changes in interest rates or increases in costs. Any capital gain that comes to fruition over the years, which will probably happen, is a bonus or even a pension.
5. Work to boost your return
To maximise your return, and be a success in buy-to-let, invest in the property by making improvements to increase its value. Take this property from a letting agent in Southampton, even in it’s sales information it gives advice on how to improve it for buy-to-let.
6. Use quality tenant checks
It is vital to do a detailed inventory of the property to safeguard yourself as a Landlord. Good quality tenant checks are also important. You can find low cost credit search and reference services through the National Landlord Association. Doing it this way will save you money compared to the costs of using a Letting Agent.
7. Take out proper insurance
A good insurance policy is vital and the market has plenty of very comprehensive policies on offer. Not having a policy in place could be disastrous if you meet a tenant from hell, like this landlord.
For more advice:
If you are already a landlord please share some of your advice and experiences with us in the comments.