Despite recent tax changes on stamp duty for buy-to-let, purchasing a property to rent out can be a sound investment with the right advice. Record low interest rates, rising property values, and greater demand from tenants make it a viable and attractive option for many property investors. However, there are a number of things you must do to become a successful landlord and ensure returns on your investment.
The location of your buy-to-let property is key. The focus is not so much on the cheapest or most expensive areas. Many new landlords also tend to look at properties only in areas they would like to live and in close proximity to where they currently live, but these are not always the best decisions for successful investment.
Consider going further afield or purchasing a property that requires renovation. Somewhere with good transport links or within commuting distance of towns and cities; areas popular with families and with good schooling; cities with universities; popular student neighbourhoods; areas with planned development and regeneration that show signs of increasing popularity. You want to choose somewhere that is consistently popular or on the rise.
Mortgage and Rental Income
There are many competitive buy-to-let mortgages available for investors with sufficient deposits and good credit. Don’t just talk to your own bank or building society. Shop around for the best deals, use comparison tools, but beware of long-term costs on mortgages with incentives or fixed-rates for the initial few years – will the mortgage deal still be suitable when it ends?
It’s important to compare these offerings and calculate the cost of the mortgage against the rent you are likely to get for the property. Ideally, rental income should cover 125% of your mortgage payments. Don’t forget to compare your potential rental income against increasing mortgage payments if you are taking out a fixed rate deal or tracker mortgage.
Do your calculations to determine whether it makes financial sense or if you’ll end up costing you the same or more than you are making in rent. You also have to factor in arrangement fees for the mortgage and purchase, stamp duty, tax on rental income, furnishing the accommodation, monthly maintenance fees if the building is factored, repairs and insurance, and whether you can afford to take a hit if the property is empty for any period of time.
Ideally, it’s best to consult a reputable independent broker for advice.They will be able to find the best deals for your needs and talk you through your options. However, you should always do your own research to ensure you fully understand the choices available.
Renting Out the Property
When it comes to renting out your property, consider your target tenant. Put yourself in their shoes. Are they students, young professionals, families? Are you hoping to let out the property long-term or short-term, or perhaps even as a holiday rental? This will affect the way you present and market your property.
If you’re targeting students, the property should be clean, simple, fully furnished, and functional. If you’re targeting professionals, it should be stylish, modern, and a little more luxurious than a student flat, but with the space for tenants to bring some of their own belongings and make their mark on the property – perhaps you would even want to consider letting it out unfurnished. For families, they will likely need a lot of storage, and they often prefer a blank canvas.
To protect yourself, it is also beneficial to take out landlord insurance to cover missed rent or damages. You will need landlord insurance and consider boiler care. Will you market and manage the property yourself, or would you prefer to appoint an agent to deal with this on your behalf? It can be tempting to take care of these things on your own, but it does actually pay to use a letting agent.
Letting agents like Vanilla Square have the means and resources to target the ideal tenant audience and find them quickly. They will ensure the best possible rental rate for your property, arrange all of the paperwork and deposits, ensure you property rental is legally compliant, conduct inspections, make sure rent is received on time, deal with any repairs and maintenance, and minimise the chance of any void periods between tenants. So whilst you will have to pay for these services, you will end up better off in the long run, in terms of time, money, success, and stress!
Vanilla Square – highly personal sales and lettings! Whether selling or letting property, you will always be liaising with one of our business partners, which makes our service that much more responsible and approachable. When you instruct us, your property will reach a wider audience as we are one of the few agents who are present on all the major property portals to offer sellers and landlords maximum exposure. If you’re looking to buy, sell, rent or lease your property, or you’re simply considering the idea, contact us by calling 0141 229 0210 or pop into our new office at 711 Great Western Road. One of our partners will be delighted to help and provide you with impartial, expert advice.