If you are entering the buy-to-let market for the first time, it makes sense to first research what it means to be a property investor and a landlord. We’ve put together the following tips to help you prepare:
Investing in the right property type
Being a property investor involves careful planning. When searching for a buy-to-let property, consider the age of the property as well as the size.
New-builds vs older properties
The advantage of a new build is that the layout and design will appeal to renters looking for a fresh-looking let to make their new home. This can be the case for professionals, a young couple, or a family. The garden will require little maintenance at the point of purchase, other than the possible need for plants and grass.
Investing in the right size property
Consider what type of tenants you intend to let to. If your plan is to become a student landlord, then you could look for somewhere with a few bedrooms. Be aware that this would make it a House in Multiple Occupation (HMO), which can require a licence in the UK.
Alternatively, one-bedroom flats tend to be popular with individual tenants or young couples looking for their own space.
If you would like to provide rental homes for families, a well-kept garden might also be high on the lists of prospective tenants.
Choose furnishings suitable for a let property
As a property investor and a landlord, the task doesn’t end with the purchase of the building. The inside is also important.
Opting for neutral colours when it comes to wallpaper and paint will help the place look bright and clean. The same goes for furnishings.
It’s worth spending some time looking for quality furniture and appliances within your budget. As tempting as it is to just buy something cheap, as you’re not the one using it, it will still undergo the same use as it would in your own home. The better the quality, the less likely it is that tenants will have to contact you with maintenance issues.
Fully furnished rental properties
For a family home, this can include appropriately sized beds and wardrobes for the bedrooms, appliances such as a fridge-freezer, dishwasher and washing machine in the kitchen, and a sofa in the living room.
For a student property, look to campus accommodation for inspiration – every student room will have a desk and a suitable chair.
Although you may want to make your property look like a home, your tenants will most likely bring their own pictures, ornaments and bed linen, so avoid wasting money on things that renters won’t want or need.
Semi-furnished rental properties
Another option is to only include basics, such as important appliances. This does provide more freedom for tenants to move in with their own furniture. You will have to decide which option will be the right one for your investment.
You could even decide not to furnish it at all. This is more likely to appeal to a family who has collected their own furniture over time, as opposed to a young tenant looking for their first home.
Calculate the costs of being a property investor and a landlord
If you will be using a mortgage to fund your investment, research rent prices in your area of choice. It’s important to know that you can cover your mortgage payments and have enough money left over for maintenance. Also, it is worth considering building up a savings fund to anticipate any void periods.
You will find that some mortgage providers request that the rent comes to about 125% of the monthly interest payments. Others may request it to be higher.
However, what you don’t want to do is set the rent too much higher than the average in the area. Unless you feel confident that your property is worth the extra cost, you might struggle to find tenants. Doing your research as a property investor before becoming a landlord is vital!
For your own profit, you should also work out the potential rental yield. You can keep an eye on rental yield reports to determine what a good average is for a specific location.
It is also important to research your landlord insurance options. As a property investor, a comprehensive policy can help to protect you financially.
Consider the best way to manage the property
If you do not wish to manage the property yourself, letting agents offer a variety of services. There are different levels of service that many agents provide, from as simple as finding and reference checking new tenants to performing periodic inspections, managing rent payments and being the first point of contact for maintenance issues.
Regular inspections of the property are a good idea in order to catch any issues as soon as possible. Whenever there is a drastic change in the weather, you should look to perform a check. It also provides your tenants with the opportunity to raise any problems they are having with the property.