Investment in property is many people’s go-to choice for generating a second income. Many people choose the buy-to-let route, however there are some important factors to consider before jumping into the property market.
Buying a property in order to rent it back out again can be a time consuming process. From researching the market to establish whether the timing’s right, to the ongoing obligations of a landlord, you need to consider whether you have the time to effectively manage your property and keep your tenants happy.
If you think time might be a slight issue, you can always look into hiring an agent to do a lot of the work for you. They’ll manage viewings, collect rent and even organise repairs. Many agents have a great network of contacts to handle most scenarios. However, be prepared for this to eat into your income quite significantly if you're using a high street agent. Finding tenants yourself or using an online agent will save you a lot money.
2. Where to buy
Once you’ve decided on buying to let, the first piece of research for many people is the area in which they’d like to buy. This includes checking current property prices, as well as the area’s history, to establish its potential before making your purchase. You’ll need to think about local schools, crime rates and of course house prices before jumping into anything. You’ll also need to find somewhere that aligns with your budget.
Many people choose to purchase a property close to where they live. This is a good tactic if you’d like to keep close tabs and be close by in the case of emergencies. If you’ve got an agent doing the work for you, this isn’t as important as they will handle most issues. But if you are buying close, make sure it’s the right investment beforehand.
3. Who your tenant is
When you’re purchasing a property, you need to consider who your ideal tenant is. This will play a big part in the type of property you research, and also the area you target. For example, if you’d like to rent to students then luxury isn’t at the forefront of your mind, but the location in respect to the university will definitely be a factor. If you’d like to rent out to a family, then they’ll require space as they’re likely to have a fair amount of belongings to move in.
Making a decision on who you’d like to rent to leads to a more informed purchase, and keeps you focused on one target rather than being unsure on which direction to take. If you tailor towards this idea of the perfect tenant, once you find them they’ll be much happier, and therefore more likely to stay.
4. Ready to sell, or renovation
This comes down to both time and budget. If you’re looking to purchase a property that’s near enough perfect and ready to begin renting immediately, it will no doubt cost you much more – especially if it’s in a sought after location. If your budget is lower, buying somewhere that needs improvements can be a great way to find a bargain in a great location.
However, before you purchase to renovate, make sure that the savings outweigh the amount you’ll need to put back into the improvements. Many places will require a lick of paint and new carpet or wood flooring, and then be ready to go. This often isn’t the case though, and unexpected costs can begin to add up and break the bank. Make sure you do your research and you’re sure you can afford before making the decision to renovate.
5. Weigh up pros and cons
Before making a decision, you need to seriously consider the drawbacks that can come of buying to let. For example, unexpected costs such as a broken boiler or flooding can come out of nowhere. If you haven’t got the money in your bank to cover these costs, you might find yourself in the red or even having to sell for a loss.
If the market takes a tumble, will you be able to continue holding your property? If you have no tenant, for whatever reason, you still need to keep up with your payments without rent coming in. Consider this as a real possibility before you purchase. Do thorough research and make sure the positives outweigh the potential drawbacks, and do what works for your current situation.
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