Saturday, July 9, 2016

The Beginner's Guide To Buy To Let

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With a growing demand for rented properties, buy-to-let is an attractive option. However, it is not without its pitfalls. It is not something that should be entered into without thorough research and consideration.

If you have some cash to spare, there are lots of investment opportunities such as property, stock options, etc. It is important to work out which best serves your needs. If you’re going down the buy-to-let route, read our beginner’s guide first.

1. Gather Information

Before you begin looking at property options, read as much as you can about property investment. Gather information from the professionals and ensure you are fully informed.

It is also important to undergo market research in the area you intend to buy in. Look for up and coming areas. You need to be able to find properties that meet your budget but that people would wish to live in. Look for transport development projects. Are there any outer suburbs that will benefit from transport expansion plans? This may make them desirable areas over the next few years. Other things to consider are amenities, schools, crime rate, etc.

2. Work Out Your Finances

All investments require a serious amount of number crunching. You will need to work out the likely cost of properties, deposits, and mortgage repayments. You can then compare this to the rent you could command. Would this be a desirable investment? Will the rent comfortably cover the repayments and provide a profit? What would happen if the property was empty for a couple of months? Would you still be able to manage the repayments?

3. Shop Around For Mortgages

It is important to shop around for mortgages to ensure you get the best deal available. Be thorough with your research. Find out as much as you can about the companies and their offering. Look for businesses that are experienced in this area. You can glean a lot of information online. For example, you can read about SMBIA and other investment companies. Look at ways they can support you as your investment portfolio grows.

4. Think About Your Target Market

When buying to let, think carefully about your target market. What does your desired tenant look like? Are they families, professionals, students, etc.? This will impact on your buying decisions. Put yourself in their shoes and consider what they will expect from a property. Can you deliver this?

5. Consider Properties That Can Be Renovated

If you have access to building resources, you may wish to consider a renovation project. Properties that need significant renovations are often priced more favorably. However, it is important to take into consideration all the likely costs for repairs and decoration. Costs can mount up, and it is easy to be caught out. Ensure you make reasonable allowances for unexpected costs.

6. Be Aware of Pitfalls

When making any investment, you need to be aware of any potential pitfalls. This could include:
  • An increase in the mortgage rate
  • A downturn in the housing market (if you are looking to sell eventually)
  • Major repairs needed on the house
  • Tenant issues such as non-payment of rent
  • The house sitting empty for a significant amount of time 
Buying to let can be lucrative and rewarding. Just make sure you do your homework and are well-informed before making any decisions. And always be aware of pitfalls.

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