Sep 28, 2015
Buy-to-let is an attractive opportunity for both seasoned property investors and those new to the undertaking. Mortgages are easier to obtain, the yields from rental income are potentially huge, and demand is high.
Recent figures from the Communities and Local Government's English Housing Report indicate that the number of privately rented properties totaled 4.4 million in 2013-14, a considerable increase over the 3.4 million reported in 2009-2010.
Investing in UK property has paid off very well for many investors, but it is essential to enter the field while fully aware of how the process works, as well as its advantages and disadvantages.
Buy in a desirable area
‘Desirable’ in this instance means an area where potential tenants want to live. Investors need to match the type of property they can afford with locations that their ideal tenants would choose. Properties close to schools will attract young families, while commuter belt residents will want good transportation links.
Many new investors choose to purchase property close to their own residence, as they know the local market better and can keep an eye on their investment, but researching other locations could pay off well.
The next step is to review the market value of the houses being considered and the rent that they are likely to yield. Lenders for buy-to-let properties usually want rental income to cover 125% of the mortgage payments.
Once the mortgage rate and probable rent have been sorted, other factors need to be taken into account, such as maintenance costs and vacancy periods, to assess the profitability of a particular investment opportunity.
Arrange a mortgage
It’s a good idea to speak to an experienced independent broker when seeking a buy-to-let mortgage. They can help source favourable mortgage deals and advise whether to fix or track. The investor should still do their own research on UK property mortgages so that they are aware of the possibilities.
Engage a lettings agent
A good lettings agent can maximise a landlord’s return on investment by ensuring regular occupancy. Regular duties include:
- Searching for tenants
- Marketing the property
- Creating tenant agreements
- Inventory management
Since most investors lack the time or inclination to manage their own properties, a lettings agent can assume the responsibility of screening tenants, arranging utility transfers, collecting rent, and arranging to renew or end tenancies.
Buying a UK property with the intention of letting it out can potentially earn a profit in two ways:
- Rental income: The amount received from tenants, minus costs such as agents’ fees and repairs.
- Capital growth: The profit can be considerable if the property is sold for more than what was paid for it.
Whatever the investor’s goals, proper research and professional assistance are key to making them reality.