Investing in property has long been considered a smart move and given the demand for rental property in the UK has increased, it is easy to see why people have moved into this market.
The change in stamp duty tax, from the 1st of April 2016, has impacted on the way that some people think about the buy to let market. There are still plenty of opportunities to make money and enjoy a good return on an investment.
Here are 7 things to consider when buying an investment property.
Who will your tenants be?
This is fundamental with respect to your investment but it is something that so many people overlook. Who you will rent your property to is likely to be the biggest factor in the long-term success or failure of your investment.
You should look into the demographics of tenants and decide who you want to attract. The choice of area and type of home you buy can impact on who is likely to rent from you, and some of the common groups of tenants include:
- Young professionals
- Downsizing retirees
These different groups all have their own needs, demands and expectations of a property. They are also likely to pose different challenges and benefits to landlords, so you need to have a strong idea about who you want renting your home.
Where will you buy?
For some investors, the most important aspect of investing in property is finding property close-by. If you intend on being a hands-on landlord, it makes sense to invest in property that you can attend at short notice or with a short drive.
What can you afford?
There is no point setting your heart on buying a four bedroom property in a stylish part of town if your entire budget can only stretch to a flat in an up and coming neighbourhood.
There are property investment opportunities for all budgets but you need to make sure that you have sufficient funding first before starting to consider buying. You also need to consider any additional fees, charges and costs associated with buying a property.
The purchase price of the home is not the total amount of money that you will spend, so be sure to examine the bigger picture each time.
What will be the rental yield?
Once you are assured of how much money you can afford to spend when buying a property, you must also focus on the rental yield. The rental yield is what you forecast to receive from your investment. The bigger the yield, the more attractive your investment is likely to be so it is important to calculate the lowest and highest yields each time.
The three key aspects of determining rental yield are:
- The purchase price of the property you have chosen
- The annual expenditure in maintaining a property
- The annual rental income
Do you know what the legal responsibilities are?
If you are looking to become a landlord to obtain an additional income, you may not be fully aware of the responsibilities associated with this. You need to have a business approach in letting out your property, which means that you need to focus on the tax issues of owning and letting a property in the UK.
Some of the most important regulations landlords need to adhere to include:
- Energy performance certificates
- Gas safety certificates
- Offering compliant plugs/sockets and safe electrical appliances
- Protecting the tenant’s deposit
- Providing Fire resistant furniture
- Right to rent checks
- Serving prescribed information
Not complying with these, and other, regulations is illegal and could land you with a hefty fine (or worse). Make sure you’re prepared to invest the time, energy and money to ensure you’re legally compliant at all times.
What to do when things go wrong?
Hopefully life will be simple and straightforward for a landlord but in reality, things can and will go wrong at times. You need to know who to turn to and this is why many landlords decide to instruct a property management company. Property management or letting agencies have experience and expertise in caring for properties and no matter the situation; they will know how to respond or what professionals to call on.
What type of landlord do you want to be?
This is a question that all landlords need to ask themselves, and it is one that they need to ask well before they move forward with their buy to let investment. Do you want to be a hands-on style of landlord or do you just want to bring in regular income with very little involvement? There is nothing wrong with either option but they create very different scenarios for landlords, and you need to be aware that being a hands-on landlord can be very time consuming and challenging.
So that concludes this episode of Ask the Estate Agent Podcast. You can contact us anytime using the links below:
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