Buy To Let
Ten Top Tips for Buy-To- Let
Increasing demand from tenants provide a good opportunity for Landlords. The Letting Centre have experienced increasing returns for Landlords due to demand outstripping supply. With lenders having long ago tightened their criteria it is next-to-impossible for prospective homebuyers to find a cheap, affordable mortgage that doesn't require a large deposit. Poorly performing personal pensions and low returns on savings in the bank have also resulted in more and more people deciding to take charge of their own affairs by making buy to let investments rather than relying solely upon the performance of a pension to make adequate provision for their retirement.
The Letting Centre in Woking provide Residential Lettings and property management only and does not buy or sell property. This enables The Letting Centre to provide completely impartial advice on all properties on the market, giving sole consideration to the future prospect of letting without the pressure of trying to make a sale. The Letting Centre are able to offer advice on rent levels, the best methods of furnishing, safety legislation and all other considerations.
The Letting Centre can provide assistance at every stage from sourcing the right property to moving the tenant in. The earlier that potential investors talk to The Letting Centre the better, as often money can be saved and returns maximised. Certain types of property will provide a reasonable income with the prospect of substantial capital growth, others will provide a lower return on investment in terms of rental income but may have substantially better prospects in terms of capital grown. Whatever the type of property, returns will be maximised by presenting the property in a good condition. First impressions will ensure that a property is let without delay to the best possible tenant at the best possible price.
Generally properties with three or less bedrooms will provide a better return than large, expensive properties and tenants will usually not wish to take responsibility for large gardens. However, if you are already in possession of a larger property, we can work with this. Gas central heating, car parking, easily maintained gardens and a shower are all items that if present in your property will ensure it is let out more quickly than a property without such facilities. Location is an important factor and properties on the outskirts of a town with car parking but within walking distance of a railway station are more likely to appeal to a wider number of tenants than a property further out of town or even in the town centre which do not have parking. Similarly family sized homes that are within the catchment of a well-regarded school will always achieve a premium.
A majority of investor clients choose to present their properties unfurnished with just carpets, curtains and white goods in the kitchen. Put simply whilst there is generally a good financial return in the bricks and mortar, there is often no financial return at all from soft furnishings. In addition to the initial cost of providing good quality furniture there is the responsibility upon a landlord to keep what they provide in good and safe working order throughout the tenancy and therefore the provision of furniture will only serve to increase maintenance costs throughout the tenancy. There can be exceptions that do make it sensible for a landlord to provide a fully furnished property, for example top floor flats without a lift, or properties with small rooms which will be made to look big if certain appropriately sized items of furniture are provided. The Letting Centre also deal with relocation agents and blue chips clients who relocate people from abroad, or who are on secondments. Often these tenants require properties in the town centre and are let out on short term lets which yield a higher than average return. However there are generally more void periods for landlords that do this and often more wear and tear.
- Choose an area where people would like to live. There can be a variety of reasons:
a. Good schools - look at catchment areas.
b. Good transport links - close to the station, close to locals shops, links to motorway.
- Do the maths - will your investment works out. What will happen if the property sits empty for a month or two. Ensure you know how much the mortgage payments will be. Traditionally buy-to-let lenders want rent to cover 125% of the mortgage payments, most also look for a 15% deposit, which protects against falling prices.
- Shop around for best mortgage deals. If you are looking for advice consider using a specialist buy to let mortgage broker. The Letting Centre have contacts with various Mortgage brokers who can offer assistance and advice. As ever the best deals are for those with the biggest deposits or equity.
- Think about the type of tenants you would like to live in your investment property. Who are they and what do they want?
a.Young professionals - the property should be modern and stylish close to transport links.
b. Families - garden and close to school catchment.
c. Corporate clients - close to blue chips companies.
- Haggle over price - Buy to let investors have the same advantage as first time buyers when it comes to negotiating a discount on asking price. If you are not reliant on selling a property to buy another, then you are not part of a chain and represent less risk of a sale falling through. This can be a sizeable asset when negotiating a discount
- How hands on do you want to be? Buying a property is the first step. Will you manage it yourself or get an agent to do so. Agents will charge a management fee, but will deal with any problems and have a good network of plumbers, electricians, handymen if things go wrong. The Letting Centre offers a High Street presence and an excellent and personal service, with many tenants sourced before you take possession of your new investment. Be prepared to give up weekends and evenings if you are considering doing the maintenance yourself.
- Know the pitfalls - One rule of thumb many buy-to let investors apply is to factor in the property sitting empty for one/two months of the year, though in practice The Letting Centre will move heaven and earth to ensure that this does not happen. Homes often need repairing if things go wrong - if you do not have enough in the bank to consider a major repair to your property such as new boiler do not invest yet.
- Research the market - If investors are willing to accept that the value of their property may slide in the short term, and ensure their property meets the criteria of at least 75% to 85% loan-to-value and returning 125% of monthly mortgage payments then it can continue to be a good long term investment.
- Don"t be over ambitious - Experts say invest for income not short term capital growth. Most buy to let mortgages are done on an interest-only basis, so the amount borrowed will not be paid off over time. If you can get a rental return substantially over the mortgage payments, then once you have built up a good emergency fund, you can start saving or investing any extra cash. Once mortgage, costs and tax are taken into account, you will want the rent to build up over time and then potentially be able to use it as a deposit for further investments, or to pay off the mortgage at the end of its term. This means you will benefit from the income from rent, paid off the mortgage and hold the property"s full capital gain.
- Parking - Properties that have parking facilities will always outperform those that don"t. The Letting Centre have experienced that brand new purpose built properties in Woking Town Centre generally do not qualify for residents parking permits and those that do not have parking spaces are generally more difficult to rent out, with it taking longer to source a tenant.