Getting Started in Buy-to-let
With regular articles appearing in the media about the rising profits to be made in buy-to-let, social housing in short supply, and owner-occupier mortgages hard to come by, investing in property to rent out may seem like a very attractive proposition to those with the cash readily available for a deposit.
But buy-to-let is not an automatic cash-cow: even in today’s booming market, you still need to choose carefully if you want to buy a property that will give you the solid income you are looking for when you invest.
Where to Invest
Location, location, location: it’s a cliché, but it has become so because it is true. Where you buy is vital to the success of your investment. This is particularly important when you are just starting out. An investment in a cheap property in a supposedly up-and-coming area seems appealing, but it is also likely to be a higher risk than an investment in an area with an already established and growing rental market. Look for areas with young populations, good transport links and high employment levels. It might cost you more to buy in these areas, but you are likely to be able to charge higher rents and will have a more stable tenant base to choose from. Areas with high student populations have also traditionally been a good place to invest, but are becoming higher risk as student fees rise. They are still well worth considering, however, as yields are traditionally higher than for many other types of property.
What to invest in
Location is vital, but so is the property itself. You might have a romantic vision of an attractive little cottage, or a rambling Victorian property, but newer properties often make the best investments as maintenance costs are lower. If you do choose an older property, make sure it is in a good state of repair and get a full building survey done before you buy.
Costs
The cost of being a landlord is much higher than just the cost of your mortgage. You need to take into account the cost of potential void periods when you may have no rent coming in, the cost of dealing with tenant arrears and potential evictions, letting agents fees and unexpected repairs. Good landlords insurance can help you cover some of these costs, but you may still need to cover costs up-front while you make a claim. Many experts recommend setting aside the equivalent of two months of rent money to cover costs other than agency fees.
Becoming a buy-to-let landlord can be both financially and personally rewarding, but property empires are not built overnight. Take things slowly, be cautious with your budget, careful with your choices, and you should be on the road to success.