With buy-to-let mortgages available at record low rates, more people than ever before are investing in property. As a result of some interest rates being fixed as low as 2.4% and a continuation in demand from tenants, this comes as little surprise.
Also coming as no shock were recent figures suggesting that the majority of private landlords plan to add to their existing portfolios in the near future.
A good time
Around 10 million people now live in privately rented accommodation; almost double the number in the year 2000. The current climate makes the thought of becoming a buy-to-let landlord an attractive proposition. However, prospective landlords are being urged to do their research before concluding any deals.
Conveyancing manager at law firm Bowcock and Pursaill, Graham Elliott, is one person appealing for caution. Noting the profitable market, Elliott said ‘now is a good time to get into the buy-to-let market before property prices escalate,’ with a good chance of achieving a, ‘regular income stream at the best possible rate of return.’
Elliot believes that the current market can offer substantial returns. He says that,’ with interest rates on bank and building society deposits remaining very low, an income of six to seven percent can be achieved.’ He warns however that, to make a profit, ‘it is essential to keep your expenditure at a reasonable rate, which means choosing a property which is in a good state of repair.’
Close to home
Elliott also suggests that investing in a property close to home is another good way of keeping costs down. He says that it is, ‘advisable to buy property within a reasonable distance of your home, so you are aware of any problem with the tenant before the situation escalates.’
More advice from Elliott concerns, ‘taking out maintenance contracts for heating boilers and kitchen appliances,’ as without, a landlord can, ‘spend a great deal of time trying to find tradesman to undertake work at short notice.’
He also says that, ‘it goes without saying that you should do your homework before buying to check there is a demand for rental property in that area.’
There are a number of pros and cons that must be considered before entering the buy-to-let market. Elliott says that common pros of owning a property in the rental sector can include
- More profitable investment than from bank or building society deposit
- Steady long-term income stream in comparison to the more volatile stocks and shares market
- The chance to build income as property value increases
Elliott went on to suggest that common cons to consider could be
- Possible increase in mortgage interest rates, reducing overall rent income
- Capital value of property falling in times of recession or market slump
- Time managing the property
There are a number of common mistakes that first time landlords can make in their infancy of renting property. These include failing to conduct thorough checks on prospective tenants, failing to manage mortgage and insurance costs and inexperience of the pitfalls of void periods.