Top tips for buy-to-let investment

Top tips for buy-to-let investment

In the past few years, with interest rates hitting a historic low, the ability to invest in property has been opened up to a far wider market. And with the demand seen in the past few years having meant that rental property has seen strong yields for owners of portfolios, buy-to-let has become an increasingly popular asset. 

But if you are investing in buy-to-let, it can be an imposing prospect if you're new to the sector. We take a look at a few of the best tips to get you started on your way to becoming a landlord. 

Do your research

Buy-to-let is an investment option that is attracting more and more people these days thanks to the impressive yields it can offer, but if you are one of these newcomers, what do you know about the market?

You need to look into what it will cost you, for example, to get your portfolio off the ground. There are considerations such as the cost of purchasing, decorating and letting a property out to consider before you ever start to think about an income. There are also costs that might not even cross your mind at first, such as letting agent fees, so it's important to research and look into the prospect thoroughly in order to ensure it's something you want to go ahead with and can afford to invest in. 

It's also vital at this stage that you look into the legalities of buy-to-let. You don't want to purchase something only to find that you have to do a lot of work to bring it up to standards on fire regulations etc. In a similar vein, research the amount of work that goes into the investment. It's not as easy as just signing a tenancy and leaving your tenant to get on with it. Are you committed to the time that you'll need to invest in being a good landlord?

The best way to research is to ask anyone you know who has done buy-to-let before, as they will have advice that can help you decide the best way to invest as well as whether or not it's for you. Alternatively, there are numerous forums and websites that you can use to get great advice. 

Choose the right area

The first thing you need to do once you decide to invest is to choose where you want to buy a property. There are temptations here that it's important to avoid giving in to. Don't buy into the most expensive or cheapest areas, for example. Instead, look at places people would want to live. 

Trying to identify somewhere that will be in demand from tenants is easy when you know what to look for. Commuter belts, places near to good transport links, areas with top performing schools nearby and close to nightlife can all be good options for buy-to-let.

Of course, choosing the right area also depends on your target audience. If you are buying a one-bedroom apartment, investing near schools won't be a great idea. You need to pair up your target audience with the plus points of an area that make it attractive to them to identify an impressive buy-to-let opportunity. 

Do the maths

Before you buy, sit down and work out all of the costs and income that will relate to your investment. You need to decide how much you plan to spend on buying and renovating, for example, and weigh this up against the rental income potential to decide if it will be a viable venture. 

If you are buying with a mortgage, you also need to look into how the rent will affect this. The majority of buy-to-let lenders will require you to make 125 per cent of the mortgage repayments per month, and they generally look for a 25 per cent deposit these days. 

Once you've worked out what your mortgage will cost and what rent you might bring in, you need to ask yourself if the investment will work out. Also look into factors such as how you would be able to weather the property sitting empty for a few days.

Shop around

In the past, most people would go to their own bank in order to get their mortgage. It makes sense, because you keep everything simple and in one place. However, it's really not the way to get yourself an attractive deal, and you may well end up paying far more than you would elsewhere.

In the age of the world wide web, you should make use of the tools at hand to give you an advantage. Various comparison sites are available these days that will allow you to use your own circumstances and intentions to find the very best mortgage deals. Remember, the better your mortgage is from the off, the better the chances are of you making a decent amount of money. 

Know the limits

One of the most important things to remember with buy-to-let is that you need to be patient in order to see success. When you invest, it's only natural to want to see a result from the get go. However, with buy-to-let, you're in it for the long haul. Although you might never make a large amount of money in one go, the steady income can be great. 

Be realistic with what you are looking to bring in. As long as you can subtract mortgage fees, running costs and other miscellaneous charges from the rental income and still see money left over, then you're on the right track to being a successful buy-to-let investor.