Six key questions for all potential landlords
BUY-TO-LET remains a popular venture, according to property specialist Leaders, which reports a significant increase in enquiries from people planning this investment.
Leaders’ lettings director Emma Wells said: “Property remains extremely attractive to people looking for an investment that will give them a higher return than savings and more stability than stocks and shares.
“Market conditions for landlords are excellent across the UK and, if done properly, buy-to-let will provide a good monthly income along with capital appreciation over time.”
So what should you do for the best chance of success?
Here are six key questions all future landlords should ask themselves before investing:
What do you want to achieve?
Understanding your motivations and goals enables you to make the right decisions from the start.
Do you want an investment likely to rise significantly in future value or would you choose a high rental return over capital growth?
Both are ideal but this isn’t always possible and choosing one over the other can enable you to maximise your return in the way that best suits your aims.
What’s your budget? The amount you have to invest, along with how much you are able or willing to borrow, will influence where and what type of property you can buy.
No matter your budget, your rental income must more than cover your mortgage payments and other costs to make a profit and you should have a contingency fund for unexpected problems or void periods. Where, what and who? Do you have a particular area, property type or tenant in mind?
Each one impacts on the others so identify at least one and go from there.
If you don’t mind who rents your property but want it to be nearby, identify which properties are most in demand locally and give the best returns.
To identify where, what and who is best for you, consult an independent agent with an in-depth knowledge of rental demand nationally and in areas popular with tenants.
What will your returns be?
By dividing the annual rent by the value of the property you can calculate a property’s rental yield. Average yields are around four to six per cent.
To calculate net return you need to take into account all costs such as furnishing, maintenance, mortgage repayments, agent and accountant fees, insurance and tax.
What are your legal obligations?
Landlords must comply with a number of rules, regulations and tax obligations or face severe penalties. These are frequently updated so it’s important to stay informed.
Do it yourself or use an agent?
The answer will depend on how much time and effort you want to devote to your investment and how nearby your property is.
Letting agents offer a range of services – from finding and vetting tenants to managing everything for you and guaranteeing the rent. Although they come at a cost, their fees are tax deductible.
A good agent can save you time and money while minimising your risk and helping you maximise your returns.
●● Buying to let is a an attractive way to invest your money