Lettings: are you considering a buy-to-let property?
Tue 23 February 2021
Residential Lettings Manager, Fiona Roe, gives her top tips to anyone looking to purchase a buy-to-let property.
BE REALISTIC ABOUT YOUR RETURN ON INVESTMENT
Whilst you may achieve a greater return by renting out a property rather than selling it, you must remember that there is a higher risk to this kind of investment; for example, could you afford it if the property were to be empty for a few weeks?
BE SELECTIVE ABOUT THE AREA YOU BUY IN
The cheapest or most expensive area isn’t necessarily the best. Think about the transport links available, school catchment areas, accessibility to shops and other amenities. Would it be easier for the property to be close to where you live now so that you could keep an eye on it? You are likely to know the market better in an area close to your home; if you are unsure, speak with a member of our team who would be willing to give you some advice.
WHO IS YOUR TARGET TENANT?
When purchasing a buy-to-let property, we always advise try to avoid choosing somewhere based on whether you would live there. Think about what would be important to your target tenant!
DO YOUR SUMS
If you will be applying for a buy-to-let mortgage, lenders typically require the rent to cover 125-150% of the repayments, along with at least a 25% deposit. Check this is affordable to you in your own personal circumstances. Don’t forget to take into account any maintenance issues that will likely crop up through a tenancy which you will be financial responsible for.
SHOP AROUND FOR GOOD DEALS
It goes without saying that for any property you are thinking about buying, but equally, if you are applying for a buy-to-let mortgage, you should consider using a broker to help you find the best deals. Many of them are completely independent and charge their fees directly to the lender. youngsRPS can refer you to a recommended local mortgage adviser should this be of interest.
CONSIDER WHAT RENTAL YIELD YOU WOULD ACHIEVE
A simple calculation for this is:
|Annual Rent / Cost of Property x 100
£6,900 / £100,000 x 100 = 6.9% yield
Most landlords will consider a figure of at least 6% as feasible.
THINK ABOUT WHAT KIND OF LANDLORD YOU WANT TO BE
Generally speaking, there are two options to consider:
- manage the property yourself; or,
- instruct an agent, such as youngsRPS, to manage the property on your behalf.
Most agents will charge a fee of between 10-15% for a fully managed service. When making this decision, think about how familiar you are with the ever-changing legislation associated with renting properties. Do you know the various paperwork required to ensure the tenancy is legal? If any mistakes are made, it may prevent you being able to evict a tenant that is not paying rent or neglecting your property; it is ESSENTIAL that you get this right. Instructing an agent gives a landlord peace of mind that their tenancies are compliant. Agents can also deal with any tenant enquiries, maintenance issues, inspections and rent collections, leaving you to simply put your feet up and wait for the rent to hit your bank account!
If we can help at all in your search for a suitable property, securing a high-quality tenant, managing a property (or all three!) please get in touch with your local branch: