What to con­sider be­fore let­ting prop­erty

Lesotho Times - - Property -

More peo­ple are look­ing to buy-to-let as an in­vest­ment op­tion. We take a look at the 4 things to con­sider be­fore in­vest­ing in buy-to-let prop­erty.

Tar­get au­di­ence: The most im­por­tant de­ci­sion you’ll make, and the one that will in­flu­ence all your other de­ci­sions dur­ing the buy­ing process, is who you want your fu­ture prop­erty to be rented to and how much you’re go­ing to rent it for.

To un­der­stand this, you’ll need to do some re­search on your cho­sen area and the types of peo­ple that are rent­ing prop­er­ties there, as well as how much they’re pay­ing.

Whether you’ll end up tar­get­ing fam­i­lies, stu­dents, pro­fes­sion­als or re­tirees will de­ter­mine what you can charge and what type of prop­erty you’ll need to in­vest in.

A fam­ily will likely need a house with more than two bed­rooms, while a young, pro­fes­sional cou­ple may be happy with a one-bed apart­ment.

What type of prop­erty and ten­ant you go for will de­ter­mine the rent you can charge.

Area: Be­fore you set your heart on some­where, it’s re­ally im­por­tant to con­sider care­fully where you’re go­ing to buy the prop­erty. Will it be in the town you live in, a nearby city or even some­where fur­ther afield?

Ul­ti­mately this is an in­vest­ment, so you need to con­sider the yield and rental re­turn. How are you go­ing to man­age the prop­erty? If it’s fully man­aged you can pos- sibly look fur­ther afield.

While you may have what seems like an ob­vi­ous choice in mind, you’ll need to think care­fully about the pros and cons of your cho­sen lo­ca­tion and how well a rented prop­erty would per­form in that area.

Have a look around and do some re­search into the lo­cal mar­ket.

Put your­self in the shoes of your tar­get ten­ants and try to un­der­stand what it is they’ll be look­ing for from the area they live in.

This could in­clude ac­ces­si­ble and reg­u­lar trans­port links to ma­jor cities, vi­brant nightlife, lo­cal sports clubs, good schools and neigh­bour­ing fam­i­lies or a large pop­u­la­tion of stu­dents — and re­mem­ber, while the area may be to your taste, it won’t be you liv­ing in the prop­erty.

If you’re dead-set on a par­tic­u­lar lo­ca­tion, you may need to re­con­sider who your tar­get ten­ants will be — have a look at the lo­cal mar­ket and see what rental prices and prop­erty styles are cur­rently on of­fer, to give you an idea of what’s pop­u­lar.

If you know any lo­cal land­lords, have a chat with them to see what their opin­ions are on the area and who’s rent­ing there.

Af­ford­abil­ity: Be­com­ing a land­lord is an in­vest­ment, which al­ways has its risks. It’s im­per­a­tive that you pre­pare for ev­ery even­tu­al­ity when it comes to work­ing out what you can af­ford.

The process of buy­ing a buy-to-let prop­erty is much the same as buy­ing a pri­vate home — you’ll need to take many of the same bud­getary re­quire­ments into ac­count as when you bought your house — mort­gage costs, de­posit, le­gal fees, stamp duty etc.

You’ll also need to be able to af­ford to po­ten­tially pay two mort­gages (your own mort­gage and the buy-to-let one), on your own and at the same time, with­out rental in­come to help off­set the costs.

This is be­cause you’ll po­ten­tially face sce­nar­ios where there aren’t any ten­ants rent­ing the prop­erty — al­though there are spe­cial in­sur­ance prod­ucts to help pro­tect you in sit­u­a­tions like this.

other things to con­sider are un­ex­pected costs, such as nec­es­sary re­pairs and ren­o­va­tions (be­fore, dur­ing and af­ter a ten­ancy), and ex­pected costs such as let­ting agents fees.

Make sure you’re pre­pared to in­vest the time, en­ergy and money to en­sure you’re legally com­pli­ant at all times.

When things go wrong: Plan­ning for ev­ery even­tu­al­ity when you’re think­ing of in­vest­ing in buy-to-let is very im­por­tant. From night­mare ten­ants to empty prop­er­ties — lots of things could go wrong and you’ll need to have the right pro­cesses and safety nets in place to deal with them.

Do some re­search on le­gal mat­ters, such as evic­tion no­tices, your right and re­spon­si­bil­i­ties, ten­ancy agree­ments and more?

Con­sider ap­pro­pri­ate build­ings, con­tents (if ap­pli­ca­ble) and rent guar­an­tee in­sur­ance in place to pro­tect your­self as well as you can from be­ing out of pocket.

Don’t for­get ten­ant ref­er­enc­ing too, you’ll want to be safe in the knowl­edge that your ten­ants are who they say they are and won’t have any prob­lems pay­ing their rent.

Talk to other land­lords and get their tips and ad­vice on deal­ing with night­mare ten­ants and any other ob­sta­cles that may arise.

Prior prepa­ra­tion will mean that, when you’re ready to rent your prop­erty out, you’re con­fi­dent that it’ll be a stress free, easy process for you and your ten­ants.

— homelet.co.uk

Be­com­ing a land­lord is an in­vest­ment.

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