For some there has never been a better time to invest in the private rental sector, especially as many are now seeing it as a more secure way to create a nest-egg for the future than relying on a pension scheme. Furthermore, the amount of demand for private rental property has increased rapidly over the past few years which means that most people who choose to invest in a buy-to-let property can find a tenant in a relatively short period of time. However, before you decide to join the private rental sector there are a few things you need to keep in mind…
Do you have experience?
It’s not just first time landlords that are investing in buy-to-let properties these days, in fact many people that have been landlords for years are now choosing to expand their property portfolios in order to make extra income. Either way, you need experience in order to ensure that your first, second or third investment will be a success, otherwise you could find yourself actually losing money. If you are a first time buyer then it is advisable to invest in a relatively small property based in the same area where you live. This means that maintaining the property won’t take up too much of your time and you will be able to keep track of your property at all times.
Those that have already let a property before will probably have a good understanding of the ins and outs of being a landlord, however this doesn’t mean that they will automatically be experts at letting out multiple properties. Looking after multiple properties means that you will need to be exceptionally organised and have enough time to fill out paperwork, arrange maintenance and build up your relationships with each tenant. The step from renting one property to two is often quite big, so make sure you are truly ready for it before you buy.
Have you thought about the long-term?
Even though the private rental sector is doing well today it doesn’t mean that it will continue to do so forever, in fact like most things it will more than likely fluctuate throughout the years. This means that you shouldn’t rush in to making an investment without thinking about what would happen if you encounter an issue. For example, would you still have enough income even if one of your properties becomes unoccupied for six months? If the answer is no then you need to think very carefully about investing in a property or look into purchasing unoccupied property insurance that can help cover the costs.
Even if you are financially secure you need to make sure that you are ready to commit to your investment for a substantial period of time, especially as more and more tenants are now looking for properties with long-term leases. Don’t forget that the property may be an investment to you but to your tenants it is their home, and so if you do decide to sell-up you could be putting them in an awkward situation. Realistically decide how many years you are planning on letting a property for and make sure you keep this in mind when offering tenancies or drawing up Tenancy Agreements.
Is the property really an investment?
It’s extremely easy to get carried away and invest in a property that looks perfect at first only to find out too late that it is actually not good value for money. Some people think that in order to get a good property they need to snap it up before someone else does. However by doing this you won’t get to do a thorough inspection of the property or the area in which it’s based in. For example, do you know if there are good schools, transport or other amenities in the area? If not you could find it very difficult to let your property out, especially to those with families or full time employment.
If there are structural, electrical or plumbing issues with the property it could cost you thousands of pounds and a substantial amount of time to fix, meaning that you won’t make a profit for a long time after you bought the property. The best thing to do is to take your time and make sure you do your research before signing up to any agreement.