Advice on buying to let
Are you looking at building a passive income through property investment? You read plenty of material online and wonder about the best property investment strategy.
Buy to let is a popular investment strategy for many people in the UK looking to build wealth through property ownership. It involves purchasing a property to rent out to tenants, aiming to generate a steady stream of rental income and potentially profit when the property is eventually sold. In this article, we’ll provide advice and guidance for those considering investing in a buy-to-let property in the UK.
Research the market
Before making any investment decisions, it’s essential to thoroughly research the market and understand the local area you’re considering investing in. Many investors look for areas which have a more positive outcome for increased prices in the long term and good rental income in the short term.
Look at property prices, rental yields in the area, demand for rental properties, and the average length of time properties remain empty between tenancies. If you need assistance locating where to find this information, then any of the property portals or your property investment manager can assist you.
It would help if you also considered factors such as transport links, local amenities, and the quality of schools in the area, as these can all impact the desirability of your property to potential tenants. Families are great tenants, so being close to schools is essential. A family will look after your property like theirs while staying for multiple years. This will mean that the maintenance on the property will mostly be taken care of for you as a landlord, whilst you have a steady income on the property for many years to come.
Consider your budget and financing options.
When investing in a buy-to-let property, it’s important to understand your budget and financing options clearly. You’ll need a deposit to put down on the property, typically around 25% of the purchase price, and additional funds to cover other costs such as legal fees, stamp duty, and renovations. You can use our stamp duty calculator below to determine the extra amount on your buy-to-let property.
You can secure a buy-to-let mortgage, which typically requires a larger deposit than a standard residential mortgage and may come with higher interest rates. Depending on your profile and income level, these factors can change. This is also possible for anyone living outside of the UK. Can I get a buy-to-let mortgage in the UK if I live abroad? Yes, you most certainly can!
We recommend that you speak to one of our mortgage advisors over a quick call to discuss these in more detail and see what is manageable for you.
Choose the right property.
The factors you need to consider when selecting a property for buy to let are;
- Location
- Size
- Condition of the property
- Rentability
- Short-term or long-term demand
- Exit strategy
Look for properties in high demand from tenants, such as those close to universities/ schools and/or transport links. You should also consider the size of the property and the number of bedrooms, as more significant properties will typically command higher rental incomes. Finally, consider the property’s condition and whether any renovations or repairs will be required before it can be rented out.
Recently we have seen a great demand for new build homes from tenants due to increased energy prices. New build homes are more energy efficient and mean fewer tenant maintenance costs.
Set a realistic rental income.
When determining the rental income for your buy-to-let property, it’s important to set a realistic figure that considers the local rental market and the condition of your property.
Short-term rental properties are higher risk but typically generate a higher income. The rise of Air BnB has meant that many landlords are accessing great returns on investments from a small short-term let model. The critical consideration here is all about location. Either extremely popular for tourists/ business people or in a highly remote location with little competition.
Look at similar properties and their rental rates to understand what you can expect to charge. You should also factor in any costs associated with the property, such as maintenance and management fees and allowances for any void periods when the property is empty.
Find reliable tenants
Finding reliable tenants is crucial to the success of your buy-to-let investment. It would be best to undertake thorough background checks on prospective tenants, including credit checks and references from previous landlords or employers. Consider using a professional letting agent to manage finding and vetting tenants, as they will have experience in the area and can ensure that all necessary checks are carried out.
Good city centre locations are ideal for short-term lettings; however, the maintenance charges are somewhat higher than if you rent these properties out long-term. They are finding a suitable property investment advisor who can share some data about this.
Manage your property effectively.
Do you want to receive a call in the middle of the night on a Sunday to sort out a broken-down boiler or blocked sink?
Once you have tenants in place, it’s essential to manage your property effectively to ensure it remains in good condition and continues generating rental income.
They are carrying out regular maintenance and repairs, ensuring that any issues are dealt with promptly, and regularly contacting your tenants to address any concerns.
Many landlords and investors use a property management company who takes a share of the income to make it an entirely hands-free property investment.
Stay up-to-date with regulations.
Finally, staying up-to-date with any regulations or legislation that may impact your buy-to-let investment is important. This includes changes to landlord and tenant laws, tax regulations, and health and safety requirements. Consider seeking professional advice from a solicitor or accountant to ensure that you remain compliant and that your investment remains financially viable.
In summary, investing in a buy-to-let property in the UK can be a lucrative way to generate a steady stream of rental income and build wealth through property ownership. However, it’s important to speak to the Property Geeks, who can help guide you through this process and highlight the advantages and disadvantages of several different strategies.
Book a discovery call with Property Geeks below.
