Buy to let - is it for you?
The property market is notoriously tough at the moment but there could still be money to make in rented properties as first-time buyers struggle to get their first step on the ladder. If you are considering becoming a landlord, here's what to think about before splashing the cash.
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Do your research
In the current climate, rental property probably won't make you a huge profit. In fact, if you are looking to make some quick cash it's not the way to go as your money will be tied up in a property that could still decrease in value. Interest rates may be at a tempting low right now, but will undoubtedly bounce back soon. In the long-term it could still be a viable option but it's essential that you familiarise yourself with the risks involved with buy-to-let, particularly if you are to get a mortgage.
Do your sums
No doubt you will have worked out exactly what you can afford to buy in terms of property, but doing all the maths will be invaluable. Check out what rent you are likely to get for your chosen property in your chosen area.
If you are hoping to get a buy-to-let mortgage, most lenders will require a minimum of 15 per cent as a deposit, and some will demand up to 25 per cent. Larger arrangement fees and higher rates, not to mention the possibility of rate rises, should all be taken into account when you are working out your budget. And just like any other financial decision, do shop around - it may even be worth consulting a specialist buy-to-let mortgage broker to ensure you are getting the best deal.
Consider too that you may not find a tenant immediately - can you afford to cover the mortgage if the property sits empty for a while? Similarly, bear in mind that any repairs required will be coming out of your pocket, and if you plan on having a letting agency manage the property, keep in mind that the service comes at a price.
Where to look
Once you've established exactly what you are prepared to shell out, it's time to properly research the area. Clearly the most rentable properties are going to be in areas that people want, or in some cases need, to live.
If you are happy to take on student tenants, then shareable properties close to educational facilities are ideal. Families, on the other hand, will be looking for an area with good schools and low crime statistics, and properties close to good transport links are particularly important for commuter belt areas.
Consider your tenant
Once you've taken the plunge, you will need to consider the needs and wants of your target audience. Students, for instance, will not be too fussy about decor as long as the property is clean, tidy and functional. But a young professional couple may be more likely to be enticed with modern, stylish fittings and a hint of luxury, while families are generally lured by neutral surroundings where they can make their own mark and turn a rented property into a home.
But do beware of going mad with fixtures and fittings - remember it is not you who is going to live there so it's essential to work out a budget for any renovation or redecoration and stick to it.
Have you recently entered the buy-to-let market? What are your top tips for finding the right property? Leave your comments below...
