Investing in Buy-to-Let? Make sure you’re considering the following.
Buy-to-let is still a solid investment choice for many, especially with recent data revealing a constantly growing rental sector. So what should you be looking out for?
1. Target Tenant Profile
Knowing your target tenant and thinking about the pros and cons of each tenant profile before purchasing is essential. In practice this means, if you are aiming towards students, have you considered the long vacant periods and the short advertising window? Your target tenant will most certainly have an influence on location, type of property, chosen rental agency and rent charged.
Research the area keeping your target tenant in mind. Important questions are: How well is the area connected by transport links, what kind of reputation do the local schools and universities have, how far away are any amenities, what about future investment or regeneration plans, is there rental demand? It’s always a good idea to take a walk around the area if you can, as it is the best way to get a real feel for the location.
3. Taxes and Insurances
It’s incredibly important to understand the taxes and insurances associated with buying and tenanting a buy-to-let property. Stamp duty is likely to be one of the big costs when purchasing and once you’ve found tenants there could be income tax to pay on your rental income, along with annual costs like landlord and building insurance.
4. Legal Responsibilities
Your buy-to-let property must be legal and compliant, meaning you will have to obtain several certificates and checks, for example; Gas safety certificate, Energy Performance Certificate and Pact tested electricals (If you are providing them). In case you’re a hands-on landlord and managing your own property there are extra considerations e.g. tenancy deposit protection. If you are purchasing from a developer, chances are, they will provide you with many of these document. Just ask the question.
5. Benefits and Risks
Buy-to-lets can be a solid long-term investment option with regular income and sizable future gains. However, the unpredictability of the property market and risks such as vacant periods or problem tenants must also be taken into consideration. A solid approach is to select property based on yields, make rental income a big part of your total return and be realistic about costs.