Tue 23 May 2017 View all news articles

Buy-to-let investment tips

Buy to let has been a great investment method for many, especially with low saving rates and traditionally low mortgage rates. But is your investment robust enough to withstand the possibilities and even eventualities the uncertain economy and unscripted rental market may throw at it?

Entered into correctly and managed effectively, buy-to-let investments can reap favourable rewards, but like everything, there are dangers to dodge along the way. Here are my top five tips to give you a helping hand.

1. Do the sums before you take the plunge! Get together as large a deposit as possible, this will help you secure a lower rate on your BTL mortgage. It may be a case to factor in a ‘buffer zone’.  Apply a rate rise scenario, can you cover 120% - 130% of the mortgage? Particularly for buy-to-let, it would be worth talking to an independent mortgage advisor, someone who can give more of an understanding into what is often a more complicated topic. We can put you in touch with our recommended mortgage advisor if you would like to speak to someone.

2. Do your homework, find out the risks of buy-to-let investments, is it the right approach for you? Then look at the type of property that suits you. I often find that larger properties such as three and four bedrooms enjoy higher levels of longevity, smaller properties of 1-2 bedrooms, tenants can and will eventually outgrow them and look to move to a larger residence.

Next, select the right area, this is incredibly important as it will greatly affect the entire make up of your investment, how much you can achieve, the possible void periods and perhaps more importantly, the quality of tenants you may attract.

Understandably landlords want the best tenants, the 'cream of the crop' professional tenants. 

However the best tenants are attracted to the best properties! Ensure your property is one of these. Is it clean and presentable? Is it modern where it can be? Are the walls tired? Could they do with a fresh lick of paint throughout? Could those carpets be replaced?

We analyse the Wirral to a microscopic level with the help of our in house Data Analyst and I am always happy to discuss areas of best investment with new and existing landlords with no obligation.

3. Understanding the long game, buy-to-let investments are not for the one looking to make a quick buck. Know the proposed rental yield (annual rent as a percentage of the purchase price). For example if you purchase a property for £100,000 and achieve a yearly rental income of £5,000, then the yield is 5%.

4. Be aware of the potential risks, don’t base your maths on a constant stream of regular rent coming in. Make provisions for the ‘what if’s’. Remember there could be gaps between tenants, what if your mortgage rates rise? What if your tenant doesn’t pay rent (insurances are available to combat the latter).

5. Finally, get the best price! Some landlords know exactly the right property when they see it and feel finding the right investment is the easy bit! Getting over the line at the right price can be much harder. But remember your position, you won’t be part of a chain so will not be relying on proceeds from another sale, and can probably complete sooner, this can give a real advantage in the negotiating process.

For more information, you can contact Daryl on 0151 342 0448 if you would like to discuss your options with regards to a buy-to-let property.

Want a rental valuation for a property? You can arrange one for free here.

As leading Wirral estate agents and lettings agents we have plenty to talk about and like to give our opinions on a few things too! Read about what we have to say, our latest news and industry news.