‘Buy to Let’ may seem an attractive option as the current low interest rates seems to offer little return on any money kept locked away for a rainy day. So if you’re thinking of investing in property and then renting it out, our brief overview below will get you asking all the right questions before you decide to take the plunge.
Research your market
Research is an extremely important tool in the decision making process. You will need some hard facts to base your actions upon as the more you know, the better the decisions are likely to be. It’s key to research location, what you can afford for the budget and who is your likely target market. With the right information you’re more likely to make the right decision.
Think about your target tenant
What kind of tenants are you after? Your preference could be anywhere from a family, a group of students or young professionals? Once you have an idea of your preferred tenant you need to consider the location and what type of property the particular group may be looking to rent. For example, you may find your venture unsuccessful if you decide to target families with a one-bedroom apartment or harder to attract students in quite neighbourhoods miles from the university.
Now that you know the tenant you’re searching for, you have two ways in which to find them either yourself or through the use of a letting agent like us! When we find tenants for customers we do a number of checks to ensure they are who they claim to be and that they’re trustworthy and able to pay the rent you’re looking to charge for the property.
The basic pieces of information you should get from a prospective tenant include a reference from their employer and their previous landlord, proof of identity, proof of current address and proof of credit rating. This can be rather daunting if you are new to the role of landlord but it’s what we do on a daily basis to make sure you end up with the right tenant.
Do the maths
You may have a strong idea of the property and tenant you are in search of but what can you afford?
Most people considering buy to let are looking for a monetary return, whether in the form of rental returns or the value of a home increasing. As a minimum the rent you charge should more than cover your monthly mortgage repayments, but also consider what is the boiler breaks or if there’s a period when the home’s empty. Make sure your figures are water tight before parting with any cash.
Also, it’s important not to forget that as a landlord, you may be faced with various different taxes, which could include stamp duty, land tax (when you buy the property), income tax (on the income the property generates), inheritance tax (if you still own the property when you die) and capital gains tax (if/when you sell the property) to name just a few. Don’t let these additional costs catch you off guard.
Consider how hands on you want to be
Finally, once you have a property and the tenants have moved in, you need to think about who’s responsible for looking after in the property? This can include repairs to the property’s structure and exterior, heating and water systems, safety of gas appliances (these need to be checked annually), ensuring electrics are safe and that furniture meets fire safety regulations. Once again your local Wright Marshall agent is on hand to help you through this process.
If after all that you’re still keen to invest in a Buy To Let property call in for a chat and we’ll clarify any remaining unanswered questions.