According to the Buy Association, over the last five years, the number of buy-to-let landlords in Britain has seen an increase of 49% and currently stands at around 2.7 million. As an individual looking to purchase their first investment property, now is the perfect time to enter the market. This article by Trust Inventory will guide you through all the steps you need to find the perfect buy-to-let property.
Start Your Home Search
There are various types of properties available on the market such as flats, bungalows, detached houses, semi-detached houses, and more. Your first decision will be to choose what type of property you would like to own. It’s important to think this part through as it affects all subsequent factors such as the price, maintenance cost, rent, etc.
Once you hone in on the type of property, start searching for the best locations. An ideal location is one that has a booming housing market expected to undergo continued growth for years to come. This depends on factors such as the strength of the local economy, employment rates, close proximity to universities, and more. A strong indicator of a good location is low vacancy rates as it translates to a low rate of evictions and satisfied landlords.
As reported by ThinkRealty, here are the best locations to purchase a buy-to-let property in the UK, based on region:
- Yorkshire: Leeds, Burnley, Dewsbury, Barnsley
- East Midlands: Newark, Nottingham
- West Midlands: Wolverhampton, Coventry
- North West: Crewe, Liverpool (North & South)
If you are having a hard time choosing the type of property and location, think about the kind of tenants you would like to have. If it’s students and young professionals, flats will be a good option. However, if it’s families, you’re better off going for a bungalow or a detached/semi-detached house.
Additionally, you can also look into buying a home “as is.” These are often lower priced, however, will require an investment on your part to make necessary repairs. These properties present you the opportunity to design a home as per your preference, increase its value through repairs and earn higher rents. But when it comes to “as is” properties, it’s best to take caution at each step. Prior to purchase, conduct a proper home inspection to find the property’s true state and the cost of repairs, in addition, hire a lawyer to conduct title deed and lien checks.
Purchasing The Property
Ideally, before starting your home search, you should visit a mortgage broker and attain a decision in principle (DIP). Through DIP you will get a clear idea of how much mortgage your lender will offer you. It also helps in the quick disbursement of funds during the actual purchase. Additionally, when it comes to buy-to-let properties, lenders impose easier income requirements.
With a DIP in hand, you can accurately create a budget regarding how much you will need to spend through savings and expected earnings from the property which will then go towards repayment. When budgeting, remember to include the following costs as well:
- Stamp duty
- Mortgage broker fees
- Legal fees
Furthermore, hire an experienced solicitor who will take care of all legalities relating to buying the property such as conducting a background check on sellers, creating contracts, handling transfer of funds to the seller, and more.
Managing the Property
To make your investment property profitable the key is to keep it constantly occupied. But, managing a property is no small task, it involves investing in advertising, interviewing potential tenants, negotiating rent, and handling maintenance. If you do not have the time to oversee these activities, consider hiring a property management service.
In addition to handling all the responsibilities mentioned above, they are well versed in measures to safeguard your property from tenancy-related issues. For instance, property managers conduct thorough background checks on all tenants, create contracts specifying deposit requirements and late payment penalties, take corrective action during violation of lease rules, and if needed handle eviction procedures in accordance with the law.
When it comes to your first buy-to-let property, be realistic in your expectations, conduct thorough research, and have a plan for keeping your property profitable for the long run.