If you are considering property investment, now is a strange time. With uncertainty hanging over the market buy-to-let mortgage rates are at low levels but investing in property is not as easy as it was.
The prospect of making money from property inflation is less certain, as house prices have also currently stalled. However, this could be a temporary situation and many investors see property as an appealing investment, something that they can add value to.
Arranging the finance for a buy-to-let investment is a process that you need to be certain of before applying. Are you considering a buy-to-let investment? If so, some simple tips can help you through this uncertain time and set up a property investment that will pay dividends in the future, no matter the situation.
Research and understand the buy-to-let market
Before stepping into the world of buy-to-let investment it is essential that you have a good understanding of how the market works, all the benefits as well as the risks.
Investing in buy-to-let property could, with current market trends, mean committing capital to an investment that may fall in value. Is buy-to-let the right investment for you, or could your money work more effectively elsewhere?
Aside, from buy-to-let, it is also worth researching other types of property investment, and other investment opportunities to make sure you know where it is best to place your money. The wrong decisions on investment could leave you with falling values and a loss of capital.
There are big wins to be made with buy-to-let investments when done right.
There are many digital tools and apps to make investing in buy-to-let property easier than ever. Get on board with technology to find (online property auctions are a good place for this), manage and finance your property investments.
Invest in the right area
Many investors make the mistake of simply investing in the most expensive, or the cheapest areas for different reasons. But there are so many more factors to choosing a promising area for your buy-to-let investment.
Put simply these areas are places that people would like to live. This can change all the time. What are the commuting links like? What gives the area a special appeal? What facilities, schools and parks are nearby? Is it good for young families or students?
The key is finding properties you can afford that also match the criteria of the people you want to live there. Finding a cheap property that would be cost-effective to turn into a multiple occupancy home for students is pointless if it is too far out for any students to want to live there.
Asking (and answering) these simple questions will help you invest in property in the right area.
Get the budget right
This might seem obvious but you need to have a firm grasp on your finances (what you have and what you might get) before your buy-to-let investment. Sketch out what you can afford (including any repairs or development costs, mortgage and other costs) and also what you are likely to be receiving in terms of rent.
Consider that many lenders want the rent to cover 125% of the mortgage repayments (sometimes even as high as 150%) and they demand 25% deposits in most cases, even larger sometimes, with higher rates than normal residential mortgage deals. Can you make the figures work with your investment?
Shop around for the right buy-to-let mortgage
Don’t just go for the first decent looking deal that you come across, and certainly don’t just go to the same building society or bank that you always use. Do your research and, if possible, use a good independent mortgage broker who can talk you through the market and the best deals.
Using a broker doesn’t mean you shouldn’t also do your own research, you should. You never know what you might uncover.
Don’t settle on price, haggle
You have strong negotiating power as a buy-to-let investor (similar power as first-time buyers) and you should use this to get a nice discount.
If you are not part of a chain or relying on selling another property to do the deal, you are in a very good position and should use this advantage to make low offers, not get talked into overpaying and push how quick you can complete. Many sellers are looking for quick and simple transactions, especially those who have been a landlord for a while and are looking to cash in
The research you’ve done on the marketplace will give you a strong basis to negotiate on price. If a seller is pushing the boundaries of what they can expect for the property, you will know and be able to argue a more market-standard price.
Plan what kind of buy-to-let landlord you want to be
After buying a property the work continues, you need to manage and maintain that property for your tenants. Do you want to be hands-on or just sit back and let the cash come in?
If the latter is your chosen route you could rent through an agent, who will deal with all aspects of the renting out the property. Agents do charge a management fee, but they will take care of anything that comes up in terms of repairs, maintenance and finances. This additional cost might be worth it for an easier life.
Again, do your research into agents (both big high street names and independent agents) to see what they can offer you. Speak to them directly to see who is best suited to how you want to run your property.
Having happy tenants is good business. Having tenants that want to stay, and respect you (and the property) will help avoid any number of issues including dreaded void periods where the property lays empty but the mortgage and bills still need paying.
Of course, there is no way to predict exactly how a property investment will go but following the above tips for buy-to-let investors, you give yourself the best chance of success.