Following on from Buy To Let in Leicester: Everything You Need To Know in 2019, we felt it would be a fantastic opportunity to share these four tips to consider if you’re looking for to purchase your next Buy To Let property.
Location is perhaps the most important consideration when buying an investment property, depending on its location alone will depend on how much (or how little) rent you can charge. If you’re looking to rent your home to students, it would be a poor investment decision to purchase a property twenty miles away from the nearest university. The location may impact the quality of tenant you attract too if you’re buying a property in a zone which isn’t suitable for the more well-to-do tenant you may desire, it is unlikely you will attract this tenant. You really need to put yourself in the tenant’s shoes; through empathising with your future tenant, you will understand whether or not it is somewhere they would like to live. Another key thing to NOT do if you want to let to a family, for example, and you find a fantastic deal over the road from a bail/homelessness hostel, these are typically rife with drug addicts and criminals (especially bail hostels, obviously).
2. Plan properly before you buy!
Planning, in general, is always a good idea and it really ties in with the last tip really well. Whilst planning where you will buy a property, who you will let it to, how you will structure your property investments in terms of tax, etc., are all very important, financial planning is an absolute must. You will be covering more than just a mortgage; you need to consider void periods and council tax as a result (see our article on a Landlord’s responsibilities for paying council tax), non-paying tenants (heaven forbid), maintenance fees and more. You also need to understand your compliance obligations including deposit protection. It’s also worth searching for properties that meet the minimum energy efficiency standards.
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3. Look For A Bargain
Our experience shows us that the market is absolutely rife with undervalued properties; these properties may be undervalued for multiple reasons, including disrepair, the house may have been repossessed, the homeowner may have had severe financial difficulties or for any number of reasons. The truth is, the only way you’ll find out why a property is truly undervalued is to ask questions and do a bit of investigating. The benefit of finding undervalued properties is obvious; the lower you purchase the property for today, the more likely it is you’ll be able to sell for a much larger profit (however, it is impossible, of course, to predict the future and at this point, it’s important to bear in mind that the value of your investments can fall as well as rise). For many new landlords who intend to buy a second property, buying an undervalued property is a must because it can help mitigate the risk of losses. Think about it, if you buy a house for £60’000 and your tenant fails to pay the rent, the mortgage payments will be far more manageable than on a property that costs £200’000.
4. Keep It Low Maintenance
Low maintenance is the dream we all wish we could easily achieve. The truth is, low maintenance is a result of three things; Long-term, happy tenants, a proactive landlord/letting agent who carry out repairs promptly (before they become nasty, expensive repairs) and a good quality property (this is achieved by carrying out regular inspections and staying on top of those prompt repairs we mentioned). It’s certainly a bad idea to just advise your tenants to place a bucket under a leaking ceiling as this will (though this is an unfortunate necessity to minimise damage to the property), of course, lead to unhappy tenants and eventually, a massive repair bill, it also leads to mould and damp (which can cause a health hazard for tenants and open you up to legal action being taken against you), electrical safety risks (water and electrics don’t mix), wasted utilities (if it’s a leaking hot water pipe, for example) and in extreme cases, risk of ceiling collapse (this happened to one poor lady who lived in a housing association when her water tank sprung a leak).
A lot of this is common sense but you won’t believe how many landlords overlook the simplest of tasks, it isn’t just landlords either. Letting agents and landlords throughout England have been known to ignore the smaller repairs just because it isn’t life-threatening or causing any risk to the tenant, whether this is due to landlords not allowing their managing agents to take action is unclear but what does tend to happen is tenants become unhappier over time and an unhappy tenant leads to an empty home…