16:34 PM, 7th November 2022, About 3 months ago
These days, we are facing a lot of challenges. The housing market is experiencing high inflation, people aren’t rushing to take out mortgages and loans, and it’s unclear when the sun will shine again. A wise man from the world of real estate once told me that after every great decline comes a great rise, It can take two months, or it can take a year. Crises always give us a chance to evaluate where we stand, what we can improve in our portfolio and our long-term goals.
The following tips will help you on your way to your next purchase if you are about to buy a property for the first time, or if you already have a respectable portfolio. It will allow you to take your time, take a more in-depth market survey, and think about the steps more carefully.
Being ready to purchase your first buy-to-let property or to expand an existing portfolio is undoubtedly a great position to find yourself in. Buy-To-Let properties can be a very attractive investment but you need to understand exactly what’s involved.
The whole process of acquiring a Buy-To-Let property is different from buying a residential property to live in. Let’s dive in.
Our first bit of Buy-To-Let advice is to be open-minded with your search locations. One mistake some landlords make is to think they must buy a property to let in their hometown. Instead, it would help if you did plenty of research into the rental yields available not only in your immediate area but also in surrounding settlements.
You might just find there other villages, towns, and cities in which property prices are significantly lower but rental values do not fall as sharply. For instance, if a property in a neighboring location is 25 percent cheaper than your town’s and rental prices are just ten percent less, it presents a more lucrative proposition.
Remember that this is not somewhere you are planning to live! It’s not about what you’d like but what your prospective tenants will want.
Just as a business must know its target market (who it’ll sell to), you must identify your own prospective tenants so that you can ensure that your property is attractive to them, which in turn will make prospective tenants want to rent from you. For example, the needs of a couple will be different from those of 5 university students in everything from how much rent they will pay to what fixtures they will expect you to provide.
If you are purchasing a property that already has tenants, you will need to carefully check what their existing tenancy agreement includes and when it expires. Whilst in many ways taking on a property with existing tenants is an advantage, you will want to create your own agreement with them to ensure each side knows the expectations of the other. Discuss this with your solicitor.
Do your homework before you start looking for a property so that you are clear about what you can afford. It’s also a good idea to consider taking some financial advice to ensure that you understand and use any available tax/savings advantages. Do your calculations carefully – this is not a time for guesswork.
Remember that you’ll also be responsible for maintaining your property and making sure it is safe for a tenant to live in. For example, if the sink needs replacing, that’s probably at your expense and not your tenant’s.
You also need to consider that you may not always receive a regular rental income. For example, your tenant might not pay on time meaning you must follow a procedure and incur expenses to recover what’s due (it’s against the law to pester/harass a tenant) or there may be a period of time when the property is empty (between tenants).
If you have a mortgage, take into account general changes in interest rates and/or the end of any fixed-term deal. That could mean an increase in what you have to pay.
Some elements of the buying process are the same when acquiring a Buy-To-Let property, but some of the questions you need to ask are slightly more specific.
You need to make sure you know: :
In addition to the mortgage, there will be other costs to consider. Some will be one-off costs when purchasing a property, and others will be annual fees. These could include:
Once you’ve found the property you’re looking for, don’t be afraid to haggle over the price. Markets fluctuate and you may not know the personal circumstances of the sellers so this is not a time to be coy about asking for a price reduction.
Once the price is agreed you will need to exchange your details (including those of your legal representative) with the seller. If you are using an estate agent, they will usually organize this for you.
Bear in mind that until you have formally exchanged contracts neither you nor the seller is legally obligated to complete the process and can back out without any serious repercussions.
If you need a mortgage then you will need to organize the survey and work towards getting a formal mortgage offer. Your mortgage provider may offer a range of survey options, so ensure that you get the right one for you and the property you’re buying (for example, you may want to obtain a more detailed survey for an older property).
A mortgage for a buy-to-let property is different from the one you would be granted when buying a property you are going to live in (a residential mortgage). Although mortgage rates on buy-to-let properties can sometimes be higher than residential mortgages, don’t be tempted to mislead or deceive the mortgage company about how you’re using the property because that would constitute fraud.
There is a lot to process in this article and it may seem overwhelming, but being a landlord can be very rewarding!
Technology can help you be on track and make sure you are ready for any future scenario.
Use the Lendlord software for detailed analysis.
In addition to a web-based desktop dashboard, Lendlord can be accessed using iOS or Android mobile apps.