Alba Management services is a leading block, estate & residential property management company based in Marlow, Buckinghamshire with over three decades experience in dealing with all aspects of buy to let property management. The following is our list of the top ten tips to find the perfect Buy to Let property.
As an income investment for those lucky enough to be able to get together a fairly large deposit, buy to let can be a very attractive option, especially compared to the relatively poor bank rates.
With the resurgence of the property & rental markets more investors are hoping to pick up property with the of hope their investment improving.
House price rises in major cities have driven the majority of people away from major cities but some areas of the UK are still to recover and more and more landlords are looking to these areas for stronger & better returns.
With mortgage rates at record lows it is helping buy-to-let investors numbers to stack up. You should however beware of these low rates as one day they have to increase and it is imperative that you know your investment will still be strong in this scenario.
There is also the tax rise being put in place that you should be aware of. Buy to let mortgage interest relief is being axed and replaced with a 20% tax credit by 2020. More information on this can be found on the Gov.uk site here.
Despite these tax changes and buy to let mortgages on the agenda for change there is still a very good reason to invest in bricks and mortar. The current situation has seen a growth in tenant demand and in response rising rents. All positives for potential investors.
If you are thinking about dipping your toe in to buy to let then read on for our top ten tips.
Here our top ten tips to find the perfect Buy to Let property
1. Understand the buy-to-let market
Investment in buy-to-let involves committing tens or hundreds of thousands of pounds to a property and more often than not getting a mortgage. It is essential to understand that when house prices rise it is possible to make large gains above your mortgage debt. On the flip side, when they fall your mortgage stays the same.
Property investing has paid off in terms of income and capital gains for many people but these people more often than not made it work through undertaking diligent research and not pure fluke. As long as you understand this the buy to let market is still a great place to invest.
There are a lot of changes coming in over the coming years with regards to mortgages and taxes involved with buy to let properties so it is important that you understand these and have confidence that the figures make sense.
Speak with local agents such as Alba Management and just as importantly anyone you know who has previous experience in the buy to let property market. If you know someone who has invested in buy-to-let or let a property before, ask them about their experiences. The more research and understanding of the market you acquire the greater your chances of success.
2. Choosing the right investment area
When looking at properties you should research the area thoroughly. Properties close to local amenities with good transport links and good schooling areas tend to rent quicker and for longer than those without. You will inevitably have gaps in a tenancy so its important to remember that every month you don’t have a tenant you are still paying the mortgage with no rent coming in.
Because of this we recommend investing in smaller properties that will rent faster, for longer and wont leave you to exposed should you be with out a tenant for a few weeks.
It makes sense to invest in a property in an area you are familiar with and have more knowledge on the market. Jumping in on an area or market you aren’t familiar with can lead to numerous pitfalls but the Alba Management team are here to help.
3. Get the best buy-to-let mortgage
Don’t just go on google or pop in to your high street bank or building society.
We highly suggest seeking the advise of a independent specialist mortgage broker. This can be invaluable and will often end up saving you money even once you have taken their fees in to account. They can not only talk you through the available deals but help you decide up which one is right for you and whether you want a fixed or tracker.
Before meeting with a broker its advisable to do your own research so that you can go into discussions with the knowledge of what sort of mortgages and deals you should be looking at.
4. Do the figures on buy-to-let
First things first. Sit down and workout the cost of properties in your budget and analyse the likely rent.
Buy-to-let lenders typically require larger deposits and want rents to cover 120% to 150% of the mortgage. If after finding the ideal mortgage and lender the figures still work make sure you have taken the following in to account;
⦁ Arrangement fees – these can be fairly large on buy to let properties
⦁ Maintenance costs and ground fees
⦁ Management fees
⦁ Letting fees
⦁ Can we cover a month or two without a tenant
⦁ insurance – property and landlord
⦁ Interest rate rises if not taking a fixed mortgage.
5. Haggle over price
Make sure you know the market before you enter in to negotiations. If a property has been on the market for a while or the local market is soft you are in a great position to negotiate.
If the property you are looking to purchase already has a tenancy contract in place with the current landlord you may be able to reduce the price for a quick sale whilst also guaranteeing yourself a tenant upon completion. Likewise if a current landlord is looking to cash out they may be prepared to take a lower price for a quick sale as they wont be needing the money to afford a move.
If you are not reliant on selling a property to buy another you are not part of a chain and represent less of a risk of a sale falling through. This puts you at a major advantage in guaranteeing the best possible price. Do not be afraid to make low offers.
6. Look at renovating a property
It is worth looking at properties that need improvements as a way of improving your overall investment. Properties in need of renovation can bring you a far greater deal initially and when renovated add real value to you rental and property gains.
It is important to do your figures to ensure that the property price is low enough to cover refurbishment allow for the inevitable over-run on costs.
7. Don’t be greedy, go for rental yield
To compare different property’s values use their yield as a guide: this is annual rent received as a percentage of the purchase price. Rent should be the key return for buy-to-let investors.
Most buy to let mortgages are done on an interest only basis, the amount borrowed will not be paid off over time. This is tax efficient, as you can offset mortgage payments against your tax bill but remember this is going to significantly change. From 2020 you will be permitted a a maximum 20% tax credit.
If you can get a rental return substantially over the mortgage payments, then you should concentrate on building a good emergency fund. Once this has been established you can look at saving or investing any extra cash. Maybe as a deposit for another buy to let property.
Don’t forget to take mortgage costs, maintenance and agents fees in to account when looking for your perfect Buy to Let property.
8. Targeting your ideal tenants
Its not a matter of finding a property that you would live in but instead put yourself in the mindset of potential tenants.
If your ideal tenants are professionals it should be modern. Students may prefer a furnished property whilst families will probably prefer a blank canvas.
Remember that allowing tenants to put their mark on a property, by painting and decorating can make it feel more like home. The plus sides of this are that tenants will not only spruce up your property for free but also take more care and pride in your property whilst staying for longer, a landlords dream. Just remember that garish and dark colours aren’t for everyone so best to make sure you have the final say on any changes. Last thing you want is the time and expense of re-decorating a property overtime a tenant moves out.
It is a great idea to get an insurance policy in place against your tenant failing to pay the rent. This is something we at Alba Management can help with.
9. Know the negatives
Before you make any investment you should always be sure you are fully aware of not only the positives but the negatives. Our top ten tips to find the perfect Buy to Let property are just the beginning.
House prices are looking good right now but growth has slowed and they could fall in the future and with Brexit on the horizon no one is really sure how this will affect the market.
Likewise, interest rates are low right now and that is encouraging people to invest whilst comfortably covering the mortgage, but what will happen if and when these rates rise? You need to be prepared for this eventuality.
Even in popular areas properties can sit empty between tenancies. This will not only mean you have no rent coming in to cover the mortgage but also result in fresh letting agent fees for every new tenancy, unless of course you are able to let the property through your own network of connections. Most investors are not in this position.
Things can go wrong, white goods break and houses require maintenance. It is important to make sure you have enough cash set aside to to cover a major repair to such as a new boiler.
10. Hands-on a landlord or Management agency
Purchasing your property is just the first step. You need to have a plan in place for letting and managing the property.
Many investors hold down full time jobs and just don’t have the time, knowledge or connections to deal with the day to day management of their buy to let property.
Fortunately this is where Alba Management comes in. We have the knowledge and experience to do everything from lettings to every aspect of property management. Of course there are additional fees involved with instructing a property management company but research has shown this to be a beneficial service and one that will save you countless man hours and pounds done the road.
We hope you found our top ten tips to find the perfect Buy to Let property useful and would love to hear your thoughts and feedback in the comments. If you would like to find out how Alba Management can help once you have found your perfect buy to let property you may like to take a look at our management services. If you have any questions about buy to let properties or Alba Managements services please feel free to get in touch.