Buy to lets can potentially offer a great return on investment. As confidence continues to grow within the mortgage market, mortgage rates as well as deposits required for buy to let purchases drops as mortgage lenders increase the loan to value they’re prepared to lend to. This has led to progression and growth within the buy to let sector. Competitive rates mean the industry is beginning to recover after suffering during the economic downturn. Despite the signs of the buy to let market re-emerging, to be successful still requires excessive planning and you must take the time to assess the risks. We have supplied you with some tips for achieving the best results below.
1. Determine profitability
Prior to the purchase you will need to determine whether your revenue can handle all of the overheads that are likely to occur i.e.: maintenance costs or ground rent/service charges on leasehold properties and whether the investment will indeed be profitable. There is a chance that within the first few months of your property being on the market that it won’t be let, you need to calculate if you are financially capable of covering the cost of the mortgage throughout this period as well as any work you may need to do before the tenant move in like a fresh coat of paint or new carpets. The more thorough you are in your calculations the more beneficial it will be to you in the long term.
2. Find the right mortgage for you
Investing in a new property isn’t something you do every day. Be patient. Research is key, find out what offers are available to you. You can use comparison websites to determine which mortgage is right for you. Many brokers are able to offer you free advice into the buy to let industry so take advantage of this and gather as much information as you can. This includes advice on how to purchase your first buy to let whether you take money from your own saving to fund your deposit or release the equity in your current residential property via a second charge commonly known as a secured loan.
3. Don’t overstretch yourself
You need to assess the success and profitability. You will require the rental income on the property to cover the mortgage as well as any other maintenance costs that may occur. The more the rental charge succeeds the mortgage repayment by the higher your profit will be.
4. Your Target Tenant
You need to put yourself in the position of the tenant and make the property as pleasing to them as possible. This requires you to put your own tastes and desires aside and make sure you are providing the tenant with what they would seek while renting your property.
You also need to make the relevant check on your tenant, often a credit search is recommend as well as using a service such as tenant verify to see any previous history your tenant may have.