5 November 2021
Goadsby Lettings Manager Jacqui Sinnetta has some useful advice for First time Buy to Let landlords. Jacqui says "Investing in a buy-to-let property has always been an attractive opportunity, and the high demand for rented property means there are a growing number of first time landlords in the market.”
Jacqui adds “There are a lot of novices entering the buy-to-let arena who want to know how to ensure success, and avoid the common pitfalls of buy-to-let investment. And, while there can be no guaranteed routes to a profitable portfolio, the six tips below offer invaluable help for budding buy-to-let Landlords”.
1. Know your market
The first rule of choosing a property to let is not to think about where you would like to live, but to view it as a business decision. A cosy cottage in the middle of nowhere may seem idyllic but most renters want good transport links and local amenities like schools, shops and hospitals nearby. Find out which type of properties let well in your area and the best neighbourhoods for buy-to-let. A good local letting agent will be invaluable.
2. Get mortgage advice
Making the right decisions around the funding of your buy-to-let investment is crucial and professional mortgage advice is a wise move.
3. Run a tight ship
You can't just jump into buy-to-let without doing your homework – or paying a letting agent to do it for you. Letting property goes hand in hand with rules and red tape, from ensuring your furniture complies with fire regulations to adhering to health and safety requirements for gas and electricity. There are also tenant deposit schemes to sign up to, careful vetting of potential tenants and the production of a thorough inventory for the property and its contents. Finally, ensure you have adequate insurance to cover the buildings and contents (even if unfurnished) and possibly even your rental income. In other words, you must dot all of your 'i's and cross your 't's.
4. Long-term approach
Forget 'get rich quick' schemes. Buying-to-let is a long-term investment. Although rental demand, and income, is high, you still need to plan and budget for voids, repairs and, most importantly, rising interest rates. It is more tax-efficient to hold onto your property for at least 10 years as your Capital Gains liability is reduced with taper relief over that period. It's essential that you think about why you are investing in property and what your exit strategy is – do you want the property to provide you with a pension in retirement for example? Do you have a plan to repay the mortgage at the end of the term?
5. An all-important buffer
If you have any money left over from your rental income after your mortgage has been paid you should put in an instant-access savings account to give you a safety net. After all, if your tenant moves out and you don't replace them immediately, you still need to meet your mortgage payments in the interim. Equally if the boiler breaks down you will have to find the money to get it fixed quickly. Problems can and do occur frequently when you rent out properties, so a savings pot is crucial to cover them. If you still have leftover rental income, the most savvy move you can make is to overpay your mortgage and reduce your debt.
6. Invest for success
While it is essential that you keep some money aside for essential maintenance and void periods, you should also speculate to accumulate. Most experts agree that a property that is presented well will let faster and attract better tenants than a tired and scruffy place, so it is worth spending a little money to create an appealing home. Similarly, nipping repairs in the bud may have an initial outlay but will prevent larger problems occurring and could save you a fortune in the long run. Another wise investment could be to use a letting agent to find and vet tenants and manage your property. There is a charge but it can be money well spent – not only will they give you a watertight tenancy agreement; they are invaluable in the event of a dispute.
For more helpful information on all aspects of Lettings contact Jacqui on 01722 343343