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Current market and economic conditions are ripe for buy to let property investment, with low property prices, unprecedented demand for rental properties and soaring rents. On top of this, concerns over pensions, low returns on cash savings and instability in global stock markets are all fuelling demand for safe investments.
These are just some of the many reasons why buy to let property investment is so buoyant and currently keeping the UK property market afloat. Consequently, the buy to let property sector is arousing enormous interest from people who have never done buy to let before.
If you are new to buy to let investment and need a helping hand, then here are some good tips to get you started on the right track.
1. Acquire the right property in the right place at the right price
It is important to buy property that will appreciate in value over time and which will appeal to the renting market. The key to this is buying the right kind of property in the right location.
Property may be cheaper in less desirable areas to live, but if the area is in social and economic decline this will cause property values to stagnate or even fall in the future, and you may have difficulty with finding a tenant. On the other hand, properties in more desirable areas may fall outside your price range and will probably deliver a lower return on your investment.
Whatever and wherever you buy, the aim is to buy your property below current market value. In doing so you increase the capital return on your investment when you sell, and you minimise the risk of financial loss if you have to sell sooner than you had planned.
To achieve your objectives we strongly recommend buying only in areas that you know and have researched well. Property portals are a great tool to keep abreast of properties for sale in areas of interest to you. Watch out for chain free properties as this may indicate that the vendor is willing to discount on price for a quicker sale.
To help you determine whether a property is being offered below current market value, you can use websites such as www.nethouseprices.com to check out sold property prices recorded by the land registry. Also consult with estate agents on more recent property sales in areas of interest to you.
During your property search you should always be mindful of the type of tenant that a given property would likely suit, and whether there is sufficient demand to successfully let the property with a healthy return.
Always make sure you undertake a thorough inspection of any property before buying. Think about how you intend to finance the purchase of the property and compile a schedule of the costs involved. To obtain a buy to let mortgage, the property you are buying must be both habitable and letable at the time of purchase and if it isn’t, you need to weigh up your finance options. For this reason we recommend consulting with a mortgage broker from the outset of any property purchase, to secure the best available finance deal.
2. Secure cost-effective Finance
When you are ready to purchase a buy to let property it is critically important that you finance it in the most cost-effective way possible.
You also need to get your funds in place as quickly as possible, as you won’t be the only one looking to snap up a bargain investment.
To ensure you get the best available mortgage deal approved as quickly as possible, it is always advisable to use a mortgage broker, preferably one which specialises in buy to let finance.
This is because the buy to let mortgage sector is quite specialised and works differently to traditional residential mortgages. It is important to know which lenders offer mortgages within the required timeframe and which products are best in different situations – only a specialist buy to let broker will have this insight.
Some specialist brokers are buy to let investors in their own right and therefore have an exact understanding of customer needs, based on first-hand experience. Highly proactive brokers will impart knowledge on how to succeed in buy to let investment.
Your mortgage broker will take time to fully understand you requirements and circumstances and with this information, will source the most competitive products from the whole of the market for you. They will then take care of everything needed to ensure that your mortgage application progresses smoothly and quickly and will deal with any contingencies for you.
3. Instruct the ‘right’ conveyancer
While it is import to get your funds in place quickly for buy to let investment, it is also important to complete the purchase quickly for exactly the same reasons. After you have worked so hard to find your bargain investment, you don’t want a rival investor to snatch it from under your nose.
This is why it is important to instruct a conveyancer who can turn around the completion of your purchase quicker than most. As with mortgage brokers it is advisable to use a conveyancer who specialises in buy to let property purchases, as they fully understand the need for speed and are used to dealing with buy to let mortgage lenders and investors.
If you do not already have a conveyancer, sourcing tools such as eConveyancer are a good way to compare quotes from quality assessed conveyancers, or contact the Law Society for advice.
4. Tenant your property
When you have completed the purchase of your buy to let property and it is ready for letting, the next task is to find a tenant.
You should begin this process as soon as you are in possession of the keys and have all of the legally required paperwork in place. The property will have an Energy Performance Certificate (EPC), as this is required for the property to be sold. By law you must now have an EPC to present within 7 days of promoting your property and must give a copy of this to your tenant. If there is gas at the property, you are required to have a landlords gas safety certificate (CP12), which must be completed annually and a copy given to the new tenants. You should also consider whether you need a House of Multiple Occupation (HMO) licence.
It is critically important at this stage to find a ‘good’ tenant who will look after your property and keep up with rent payments.
To maximise the probability of checking in a good tenant, it is advisable to use a reputable letting agent.
A reputable letting agent will promote your property to a large audience, and on all of the major property websites. This will ensure that your property is let quickly, and void periods are minimal. They will conduct thorough tenant reference and credit checks to ensure they are a good tenant, with a good rental history. At The Online Letting Agents you can find a tenant for FREE.
Using a quality letting agent ensures that everything is done in a legally watertight way by professionals.
At this point you can chose to either self-manage or have the letting agent manage the tenancy for you, depending on what arrangement you agreed to from the outset.
Always remember that a ‘bad’ tenant could cost you dearly in lost rent, legal costs and damage to your property, so it is critically important to take all necessary steps to ensure you find a good tenant.
5. Insure your property
Regardless of whether you self-manage or have a letting agent manage your property for you, you will need to ensure you carry appropriate buildings insurance, and contents insurance for anything you own within it. This should be arranged in advance to take immediate effect from the day on which the contracts of your property purchase are exchanged.
For buy to let property you need to arrange special cover known as Landlord Insurance. It is recommended that you chose a policy which provides cover against accidental and malicious damage caused by the tenant and third parties – this cover is usually optional and is rarely offered as standard.
Shopping around for landlord insurance is highly recommended as policies and premiums with different insurers vary widely.
6. Manage your property
If you chose to self-manage your property, your responsibilities will include:
- Maintaining the property and its contents
- Carrying out an annual gas safety check
- Monitoring rent payments
- Dealing with any tenancy issues
- Performing any routine property inspections
To minimise the cost of maintenance and repairs, many landlords offer their properties as unfurnished wherever possible. This is of course not possible in the case of, for example, student lets.
To assist with managing your property you should enlist the services of a trustworthy Gas Safe registered engineer, to maintain your gas heating, plumbing and carry out the annual gas safety checks required by law. If you are not very handy it would also be useful to have a general builder on hand to carry out any maintenance and repair work needed.
If you pay a letting agent to manage your property, they will take responsibility for doing everything for you.
7. Maximise your tax efficiency
When you complete the purchase of your first buy to let investment, you will have to register with HMRC to submit a tax Self-Assessment for income earned from property.
To ensure you do not pay more tax than is necessary, it is always worth appointing an accountant to complete and submit your self-assessment tax form on your behalf.
If you take care to use accountants with knowledge of tax regulations relating to income earned from property, they will advise you on how to maximise your tax efficiency.
8. Make effective use of free resources
As you can probably appreciate by now, to succeed in buy to let investment you need support from a team of dependable and trustworthy professionals who understand and can deliver exactly what you need.
If you are new to buy to let it is more than likely that you do not have this all important support team in place…… but don’t worry.
To help you make informed decisions and get the support you need to be a successful landlord and buy to let investor, there are a variety of websites which offer a wide range of useful tools and information.
www.buytoletlandlordsolutions.com offers FREE and unrestricted access to a full range of Low-cost/high-value services and resources for landlord investors – mortgages, insurance, conveyancing, property services, tax advice and more .
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