Buy To Let Advice For Landlords
Looking it purchase your first buy-to-let property? This handy guide will help future landlords by giving good advice on buy-to-lets.
Table of contents
An Oasis Living guide for landlords: buy to let advice
We delve into everything there is to know about buy-to-let.
Buy to let mortgages
It's critical to verify interest rates before investing in a buy-to-let home. Lower interest rates may make borrowing money simpler at first, but because they are likely to change in the long run, you should be sure that the revenue from your rental will cover the mortgage both now and in five years (for example) if interest rates rise.A buy to let mortgage differs significantly from a mortgage for a house you own and reside in. For starters, the amount you can borrow is generally determined by the rental income you anticipate from the home.
However, alternative sources of income are also considered in certain circumstances. As a rule of thumb, some lenders stipulate that your rental income must be 25% to 45% more than your mortgage payment. The terms of eligibility may also differ.
Do your research
We recommend that you complete your homework. Going to see a buy-to-let mortgage broker who can specialises in this area is a good idea. They can walk you through the different options available to you. You'll get a better notion of what you can afford if you're unclear whether you can afford to buy a property to let. If you have a substantial sum of money, you can consider whether you should put down a greater deposit on a house or even buy two.
Location Location Location!
It's tempting to secure yourself a bargain two-bed house somewhere in the north-east when you live in the outrageously expensive London, for example. But be careful: not being familiar with the area can lead to serious difficulties and even losses. You might be unaware of the market in the area. The demand for rentals in the area could be weak or falling, and the ban on most letting fees for tenants could mean estate agents vacate the area, so you could find it difficult to find tenants and let your property.
Should you decide to sell the property, you may find yourself needing to travel and possibly taking a financial hit. So do thorough research and... then do even more! Also consider the type of prospective tenants in the area: is there likely to be demand from young professionals, young families or students? That will also dictate the type of buy to let property you purchase.
Where could property prices increase the most?
Rental income is only one source of revenue from buy-to-let. The other, longer term return comes from any increase in the value of the property on resale. Another study, by Post Office Money with the Office of National Statistics (ONS), identifies the regions of the UK where property price growth is likely to be strongest in the coming years. Consider and research this aspect when deciding on a location.
What does the local area offer?
Choosing the location of your investment property needs to be the most appropriate choice for you and your investment.¬† It's crucial to do your homework on the property market in the area where you want to invest. Any plans for nearby development could increase the value of a property in the future. One way to stay on top of this is to sign up to local newsletters. There are advantages to having an investment property close to your home, as it may be easier to manage the property on your own. Alternatively, if you employ a letting agent or property manager, your possibilities expand to a larger geographical area. It is necessary to evaluate the expense of utilising a lettings agent.
Old or new?
This is entirely a personal decision based on budget, preference, experience and how much time you have to carry out improvement works. Our suggestion is to seriously do your homework. New-build flats are appealing to tenants because they may make renting more convenient, although they are often more expensive than older properties. They also tend to be aesthetically pleasing to young professionals looking to rent. There will be a lot of competition for the same renters from the owners of other new-build flats, so keep this in mind when looking for a buy-to-rent property.
Whether you buy a new home or an older one, the amount of money you spend on renovations will vary drastically. While you do not intend to live in the property, someone else will, so it must be appealing to a potential tenant without being too expensive. It's also critical to consider how you spend your time and money.
Weigh up the cost
You'll have to wait a long time to see a return on your investment if you spend £12,000 redoing the kitchen! While the property could be filled with tenants faster, there's always the possibility that potential tenants may do their research and choose a rental with an older but decent kitchen at a lesser price.
Regardless, it's critical that your home fulfils certain standards; a fresh coat of paint, as well as fixing any mould or damage in the bathroom or on windowsills, and installing a refrigerator, washing machine, and, if the space allows, a dishwasher are all smart ideas.
Don't forget the paperwork
Do I need a buy to let license?
Landlords in several parts of the UK are required to have a licence. To find out if you need a selective licence to rent out your property, contact your local council. You may need an HMO licence if your property is an HMO. An HMO is characterised as a home rented to two or more households who share bathroom and kitchen facilities. However, HMO legislation and licencing requirements vary by council. To find out what the HMO guidelines are in your area, contact your local government.
Which is better: furnished or unfurnished?
There are no set rules concerning renting a property furnished or unfurnished, but it may help you attract ideal tenants. If you're intending to rent to students, you'll need economical, durable furniture that can survive student living and partying! Unfurnished properties can be more appealing for longer tenancies because tenants can choose their own furnishings and personalise the space. A third alternative is to rent a property that is partially furnished. If you're ready to be flexible with the furniture you provide, it opens up your buy to let property to a larger market.
You've got your buy to let property, now what?
It is critical to have an ideal, reliable tenant ready to move in from the date of completion for a rental property to reach its full potential.Once your tenants have moved into your rental property - congratulations! -¬† your number one priority must be ensuring that rent is collected on time. When it comes to collecting rent and other expenses, many landlords lack assertiveness. If you start slacking, you could find yourself chasing six months' worth of late payments before you realise it.
For those with a mortgage, you could quickly find yourself in financial problems with your lender. If tenants stop paying rent and ignoring emails and calls then you must start eviction proceedings sooner rather than later. Letting agents should have plans in place for late-paying tenants and will guide you through any potential legal conflicts.
Keep business separate!
Keep in mind that your buy-to-let property is not your primary residence. It's a company, and you should treat it like one. Forget about your personal preferences and consider the property from the perspective of potential tenants. Decorate and furnish your property to appeal to a wide range of potential tenants rather than your personal preferences. Resist the urge to install high-end appliances as this adds little to the rental value. Expensive electronics will also have hefty repair and replacement costs.
Establish a positive connection with your tenants
Early on, building a rapport can have a tremendous effect. If you want to examine your property on a regular basis, and you'll need your renters' consent to do so. So, before inspections, give enough notice, and win their affection and trust with a few small gestures like a welcome hamper.
Find out more about how Oasis Living can help you find the perfect tenants and improve your property management experience. Head to our website now or contact one of our property experts.
More transparent letting services with Oasis Living