Our top ten tips will help you understand the conundrums of investing your money in bricks and mortar.
1 – Know Your Market
Research, research, research! Know your risks as well as your benefits and ensure Buy-To-Let is the investment you want. On a short term basis; tying up capital in a property that may fall in value has to be considered against putting your money in a high rate savings account that would probably beat most investments, however on a long term basis, investing wisely in property may be a sound investment for your future. Talk to investors, discuss your concerns and listen to their advice.
2 – Know Your Area
Properties in a good area will always sell. Avoid run down parts of any town, you are far better investing in a rundown property in a good area rather than a good property in a rundown area. In order for your investment to be successful, ask yourself the following questions…Which parts of town are appealing and which should you knowingly avoid? Are there good public transport systems nearby? Is the property close to a motorway network for professionals? Are there good schools close by that will appeal to young families? Where do the students want to live?
3 – Figure Out The Figures!
Most buy-to-let lenders generally want the rent to cover at least 125% of the mortgage repayments as well as a hefty 25% deposit. Think about the cost of the property & the rent you are likely to achieve; could you afford for the property to sit empty for a month or two? Would your investment still be viable if interest rates were to significantly rise?
4 – Mortgage Matters
There are literally 100’s of mortgages out there and obtaining the right one for you is an absolute must. Our advice to you would be speak to an independent mortgage advisor who can offer you the whole of the market.. Please remember, asking for advice and information means you are under no obligation to use their services. Here at Letting Solutions Blackpool we are happy to recommend that you speak to Carl Slade of City investments, where he can discuss with you, your needs and make the appropriate recommendations. Carl can be contacted on 07753745941 or alternatively at [email protected]
5 – Put Yourself In The Shoes Of Your Tenants
Instead of imagining whether you would live in your investment property or not, think about who are they and what do they want? A student for example, will want it to be easy to clean, comfortable but not luxurious and close to public transport would be ideal. Professionals would probably opt for something modern and stylish. Families would most probably want space, gardens and close to good schools and nurseries.
6 – Yield, Yield, Yield!
To compare different property values, use their yield. Yield is annual rent received as a percentage of the purchase price. For example a property offering £5,000 worth of rent, that costs £100,000 to buy has a 5% yield. For a £100,000 property that could rent for £500 pcm, you would need a £25,000 deposit and approximately £2,000 in buying costs.
- £75,000 mortgage at 5% interest rates = £312.50
- £500.00 rental income x 12 = £6000.00
- Difference = £2,250.00
- Deposit & Buying costs = £27,000
- Annual return = 8.3%
7 – ‘Doorstep’ or Rundown Properties
An investment property on your doorstep may not be the best investment. Be prepared to look further afield in order to take advantage of a good purchase. It maybe worth considering buying a rundown property, with a view to renovating it. This way to get a far better deal and done correctly can add significant value to your investment. And don’t forget, the cost of any refurbishment is TAX deductible – not a bad little bonus!
8 – Haggle!
It is without doubt a buyers’ market, so take advantage and don’t be afraid to go in with a low offer – after all they can only say no! As an investor, your position as a buyer is to your advantage as you are not caught up in the dreaded chain. This can be a major asset to you when negotiating your deal.
9 – Peaks & Troughs
Like any business, don’t go in blind or wearing rose coloured spectacles. Be aware of any pitfalls and be prepared should they affect you. Rising interest rates, falling house prices, an empty property or major repairs are all things that you will need to consider. A buffer in the bank is a wise move, as homes often need repairing. If you cannot pay for a major repair to your investment, such as a new boiler, then you may want to reconsider.
10 – Property Management
Buying a Buy-to-Let property is only the beginning. You can consider managing the property yourself, however be prepared to give up evenings and weekend for viewings, repairs and advertising. The cost of management may be far less than you think and can also offer you peace of mind. We will be more than happy to offer any guidance or assistance that you require and we invite you to take advantage of our free, no obligation valuation of the letting potential of your property. Here at Letting Solutions Blackpool, we are sure that we can save you time and money – after all, we offer you the key to successful letting!