Now might seem to be a good time to get into buy-to-let, not least with a seemingly landlord-friendly government having just been elected. However, just because there’s now no prospect of rent controls or a ‘mansion tax’, doesn’t mean that you can be reckless in entering this market. Even in the most advantageous times for landlords, buy-to-let has its risks, just like any other investment. Here are 5 tips that we would give as an Independent property Inventory provider.
- Decide between a cash or mortgage purchase
While a cash purchase is tempting if you are fortunate enough to have the funds, we would still recommend an interest-only mortgage, on the basis of the better returns that it earns you.
When you buy with a mortgage, you only pay back the loan interest rather than the capital that the house is worth. A Wriglesworth Consultancy survey revealed a 16.3% return per year for buy-to-let properties bought between 1996 and 2004, compared to the 9.3% annual return garnered by cash purchases.
- Define the aims of your investment
Your present circumstances will largely dictate this. Do you want your property to support your income? If so, you will want one that delivers steady earnings from rental yields. If you are saving more for the future, however, you may instead look for long-term capital growth.
- Carefully research your location
Knowing your answer to the above will help you to better determine a good location in which to invest. Areas with average house prices but pronounced rental demand tend to offer strong yields, whereas it is those places with the strongest and growing economies that usually offer the best prospects for capital appreciation, due to the combination of limited housing supply and high demand.
- Choose a property that will rent well
It’s all very well to invest in a pretty cottage or handsome mansion that you could imagine living in yourself, but you should remember that you aren’t buying accommodation for yourself – you are investing capital into a property that will house someone else. How much maintenance will be needed on the property? What is the standard of insulation? Is there space for tenants to park? These are the practical questions that you will need to ask yourself.
- Always have a professional inventory carried out
Yes, you would expect us to state this one, given our own professional service as a property inventory provider – but its importance cannot be doubted. With the right, impartial record of the property’s condition prior to the tenant moving in, you can protect yourself and ward off potential disputes. It’s your first line of defence when the time comes to accept your first tenant – so don’t skimp on it.