Once you have made the decision to invest in a residential Buy to Let property, it’s worth sticking to a few basic rules. This is likely to make the whole process simpler and easier to manage further down the line. They are;

Decide what type of property you want

To some extent this might be governed by your cheque book, but have in mind what you are looking for and why. Most private landlords will agree that flats are more management-intensive than houses, but in some areas the young urban professional is attracted to the benefits that come with residing in a centrally located, well appointed apartment in a city centre. On the flipside, houses usually have gardens - which need to be tended!

If you are considering multiple occupancy then a larger house in need some work might be ideal if you have reasonable DIY skills and a knowledge of the law relating to multiple occupancy dwellings. University towns are worth considering if you are looking at converting a large property for multiple occupancy for obvious reasons.

Remember that flats are more susceptible to neighbourhood disputes and noise complaints and because they are, by necessity, leasehold properties, you have your own landlord’s rules to abide by, as well as a service charge and ground rent to pay.

Stick with what you know

It’s almost always better to stay local. Invest in an area you know well and that you like. If possible, buy in an area you wouldn’t mind living in yourself. After all, a cheap property is usually cheap for a reason! The better the location the better your chances of a reliable income and long term capital growth - with one exception (see (4.) below).

Think about management hassle

Try and buy in local in Maidenhead. There is nothing more soul-destroying than a 90 minute trip up a snow-covered motorway at 8pm on a Wednesday night to deal with a broken boiler! Even if you intend to employ a managing agent, it’s well worth considering local investment. Owning property nearby is a much easier proposition to manage.

Think outside the Box

If you know an area well and there are good reasons to expect that the area is improving then investment in that area is well worth considering. Sometimes the construction of a new railway station or improvement of the road network will make the case for you. Sometimes it is more of a cultural thing. In the past many investors have followed ‘the pink pound’ with great success, buying in low cost urban areas that are becoming popular with vibrant metropolitan communities usually made up in large part by artists, artisans and the affluent metropolitan gay community.

Make sure there is a strong tenant demand

Remember, your investment is only an investment if it provides a return! If your property is empty for long periods of time then it can quickly become a crippling burden on your monthly cash flow. Also, buy the type of property most in demand in the area you have chosen. There is little sense in buying a small one bedroom flat in a primarily family-oriented suburban area with good schools, unless you plan to target the recently divorced of course!

Don’t forget the hidden costs

All property costs money to buy, sell and own. There may be a significant stamp duty charge for you to pay on purchase these days and remember it is higher for buy-to-let than for owner occupiers. There’s also insurance, statutory checks of gas and electricity and other utilities and the upkeep of the property’s fabric and internal fixtures and fittings such as smoke alarms and cookers.

Remember to allow for void periods when the property is empty and keep a cash float to cover void periods, letting agent’s fees and general maintenance.

Consider buying new build over old stock

Unless you are confident that you can add extra value by refurbishing older property for let, or the return on investment is higher for character properties in that area, then buying modern property that is well insulated, built to modern standards and in less need of regular repair and costly maintenance is likely to save you an awful lot of time.

Always do a cash flow analysis before you buy

As with any business proposition, make sure you undertake a full cash flow analysis before you commit.

This should include all capital costs and ongoing expenses and allow for regular inspections, maintenance, professional fees, void periods and tax liabilities. Allow for the additional ‘hassle factor’ that comes with owning property and make sure that the return you are getting (both rental and capital) is worth the risk.

 

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