Are you thinking of becoming a landlord this year? If you do, you will be joining a prosperous industry that is helping to fill the gap left by lack of social housing and poor access to credit for first time buyers. The private rented sector is growing fast, with rising rents and relatively cheap property giving landlords the kind of healthy rental yields that should allow them to build a successful business.
However, a word of warning: being a landlord is not an easy route to instant financial success. You should never fall into the trap of seeing your properties as a cash-cow that will keep on giving, whatever you do. If you want to become a landlord, you need to see it as a business. That applies whether you plan to take on one property, or build an empire of hundreds.
First steps
Before you become a landlord, think about why you are doing it. If you just want to make money quickly, playing the stock market might be a better choice. The property market can be volatile, and there is no guarantee that just because rents are rising now, that they will keep on rising. Expert voices are beginning to warn that the buy-to-let market is likely to experience a levelling out soon, as incomes fail to keep up with rising rents. If you get into property, you need to see it as a long-term investment.
Investment decisions
Making successful long-term investments means carrying out planning and research. That might be dull, but it’s necessary. You wouldn’t open up a shop, for example, without putting together a proper business plan. When you buy to let, you need to do the same. Look very carefully at the history of rental levels in the area you want to buy in. Consider whether you would be able to cope financially if rents went down. Make a list of costs other than your mortgage: landlords insurance, letting agents fees, maintenance, service charges and safety certificates all cost money. None of them are optional. If your expected rent is only just higher than your mortgage, you are likely to run into financial difficulties if a tenant fails to pay their rent, or your house needs an unexpected major repair.
Buying property, whether to live in or to rent out, will always carry some risk, but there are great rewards to be had. To get them, start your journey into buy-to-let cautiously and carefully.