The Beginner’s Guide to Buy-to-Let

buy-to-let properties

Between poor savings rates and new pension freedoms, the last few years have seen a significant increase in people investing in properties for the first time. Becoming a landlord can be a useful way to maximise your savings, supplement your income in retirement or – if you are willing and able to invest in multiple properties – potentially even become a primary source of income. However, property, like all investments, involves risks and is certainly not something to storm into unprepared. If you are thinking of investing in buy-to-let, there are a few things to consider.

Investment Goals

Before starting to look for an actual property, it is important to think about your goals. For example, do you want to primarily invest for yields – cash income through rent – or for growth – increase in the value of your home for longer-term gain? Any successful property investment should provide a combination of the two, but your choice of property can significantly affect which is the more significant according to your objectives.

Another thing to think about is whether you intend for your investment to be indefinite (though you should still have an exit plan) or for a certain number of years. Some property types – especially niche properties – offer stronger income potential but weaker resale options, making an exit in just a few years more difficult.

Choosing an Area

Do not make the common mistake of limiting yourself to your local area when choosing your investment property. Investing “remotely” in a market some miles away does not have to be difficult at all, and does give you a lot more choice and the potential for greater profits. Different markets around the country offer different purchase prices and different yield/growth levels and balances, along with various risk profiles and opportunities in property types.

While you should choose an area – or at least narrow down to a shortlist of possible locations – before looking too hard at properties, an idea of what general property type you want to invest in can be useful. If you want to invest in a flat to benefit from lower outlays, for example, you can focus on areas where groups such as young professionals are placing demand on small apartments.

Buying the Property

Once you have set your goals, chosen an area, and then find a suitable property, then the obvious next step is to buy it. However, the purchase process for properties is a lot less straightforward than the process of buying most other things, so there are still some things to bear in mind. Before making an offer on the property you wish to buy, research the prices of similar properties in the area to know what is reasonable. Try to negotiate a good deal, but don’t go over the top and if the price is already attractive understand there will likely be little room for further movement.

Do the same with rents to get an idea of yields before making an offer. Don’t take the estate agent or the seller at their word for the kind of rents the property can achieve. Look at what other, similar properties nearby are getting in real terms, and make sure to account for all outgoings such as mortgage payments, agency commissions, and some provision for maintenance costs.

Author Bio

Hopwood House are property investment specialists, with a large portfolio of buy-to-let properties for sale across the UK and in the student property investment market.

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