The country is experiencing a buy-to-let boom, as interest rates on savings are low and investors seek higher returns from the property market.
Last year, the value of buy-to-let mortgages on new purchases rose to a total of £12 billion – 25% higher than in 2013.
If you’re thinking about entering the market, there are many things to consider, so here are just a few things to think about:
When searching for a buy-to-let property, you don’t have to stick to traditional older homes. You could buy a house that isn’t even built yet. You’ll see the developer’s plans and have a brand new property at the end.
New build blocks of flats have many advantages – they are designed for people coming and going, meaning that when your tenants are moving in and out, they have easy access and suitable facilities.
As more young professionals are renting, a modern, stylish home will be what they’re looking for. One-bedroom flats are especially popular and cut costs down for all parties.
However, it is important to remember that initially, new builds can throw up lots of small issues if things refuse to work.
Whichever property type you choose, clean, neutral curtains and carpets will always attract tenants. Basic yet good quality furniture will last you a while and suit all types of renters.
Although you may want to make your property look like a home, your tenant will most likely bring their own pictures, ornaments and bed linen, so avoid wasting money on things that renters may not like.
If you will be using a mortgage to fund your investment, always research rent prices in your area of choice to ensure that you can afford payments and have enough money left over for maintenance and to cover any void periods.
Most mortgage providers request that the rent comes to about 125% of the interest payments.
For yourself, you should also work out the yield – the rental income as a percentage of the property price. A good annual rental yield is around 5%.
It is also important to look into landlord insurance. Investing in the buy-to-let market comes with risks, but a good policy can cover you for rent guarantee and unoccupied property – vital for keeping a good business.
Managing the property
If you do not wish to manage the property yourself, letting agents offer a variety of services. If you wish to keep your costs down, some packages include simply finding you a tenant.
If you use a fully managed service, always remember that there are some documents you can provide yourself, such as an inventory and Assured Shorthold Tenancy agreement (AST). This could save you hundreds of pounds and these forms can be found in any legal stationers.
If the agency manages your property, they will market it, show tenants around, go through all the paperwork with them and chase them if they don’t pay rent.
If you choose to go it alone, you could require a guarantor for each of your tenants.
Also, websites such as Gumtree are a great place to advertise your property.