As savings interest rates are currently at almost zero levels. Lloyds, for instance, is now offering a measly 0.05% on savings accounts, leading many to save their hard earned money under their mattress’s. People are looking at alternative ways to either boost their income or to save for their pension pot.
Buy to let even with the recent tax changes is still serious business and there is still plenty of profit to be made in the residential property market. There are however many pitfalls that the newbie investor should consider before putting their money into property, with this in mind we have complied a few tips to help you start your journey.
Buy to let investments can be profitable, they won’t normally transform you into a super rich property expert and it’s usually a long game plan. There are books doing the rounds of individuals who have made their fortune through their buy to let portfolio and there are numerous property courses being run on a weekly basis to which a novice can spend thousands of pounds with little or no return.
The average newbie landlord, however, will usually make modest profits. There are various factors that can deplete your income i.e. voids on properties, tenants not paying the rent and now many government measures in place that are attempting to get rid of private landlords therefore leaving more homes available for first time buyers.
The time and effort involved in being a landlord can be immense. Will you be attending property auctions to purchase your properties, spending your time surfing the web on the local property listings or using a lot of shoe leather to make yourself know to the local agents. If you are working in full time employment while starting out on your property journey you will need lots of stamina as this can take so much time and effort. I find Christmas is a good time to look at property and perhaps put offers in, the majority of the general public have nothing on their minds except turkey and tinsel during the month of December.
Once you’ve purchased your buy to let, you must decide if you have the time and inclination to manage the property yourself or whether you leave in to the professionals! If managing the property yourself you will need to ensure the property meets current legislation before renting it out. Then once the tenants are in situ, you will need to carry out ongoing maintenance work along with yearly legislation certification.
Big decisions – what type of renter are you looking for, are pets allowed, are you looking for long term capital growth or a certain annual yield.
If you cannot take lots of criticism from tenants and the media then you may be better off letting a managing agent act on your behalf, at least then there will be no 2am phone calls from tenants “I’ve locked myself out” or “the heating has gone off”.
If you are serious about getting into the buy to let business, I would suggest you join the likes of The National Landlords Association or Guild of Residential Landlords, they offer shed loads of free information and documentation. There is also online training with The NLA which is superb.
Speaking to an accountant who understands property tax
Laws for landlords have changed, so it is advisable that you talk to an accountant about your financial liabilities.
Many amateur landlords do not realise that they must have a buy to let mortgage if they need finance, a standard residential mortgage will not suffice. Lenders must be advised that you will be renting our your property and they will need to give written permission, falling foul of lenders is not advisable as they may well call in the loan.
If you do plan on having a mortgage, you need to ensure that the house you have in your sights is accepted as security for the loan. For example, many lenders won’t offer mortgages secured on flats over restaurants.
Amateur landlords will hear due diligence being mentioned over and over again by experienced landlords, this should not be taken lightly.
Happy Property Journey!