Buy-to-let properties can be great investments, particularly because they are highly unlikely to result in losses. You only need to make sure you purchase the right property in the right area. You should note that these investments are not get-rich-quick schemes. They are low-risk investments, so you should expect the returns to be moderate but consistent. Here are some tips to help you select a buy-to-let property:
1. Research the area
To make sure you get a sizeable yield from your investment, you need to purchase property in places that have good rents. One thing you need to check is the transport network in the areas. A place with good transport networks is likely to be in high demand and should always be occupied. The high demand will give you a chance to charge higher rents.
To reduce your costs, you should go for buildings which can easily be renovated and maintained. Ideally, you should avoid older buildings as they will have very high maintenance costs. The AC systems in such buildings are likely to fail consistently and appliances are generally more likely to break. The maintenance cost of new buildings should be less than 1.5 times the monthly rental rate.
3. Rental Yield
The property should give you enough returns to cover running costs, cover your mortgage payments, and any other unexpected expenses. You can use online tools to calculate the rental yield of your property. This figure will help you determine whether a buy to let property is worth investing in.
4. Research potential tenants
If you have never owned a rental property before, you might have trouble managing difficult tenants. You should check the residents of an area to get a rough idea of what kind of tenants you might get. They may be students, people with families, or even people in informal sectors. You should generally avoid areas that are full of people in informal sectors as they may not be able to guarantee you timely payments.
5. Obligations and legals
It is important to learn your obligations as a landlord. Failing to fulfil your obligations can result in lawsuits, and these will be bad for your business. In the UK, landlords are legally supposed to provide an Energy Performance Certificate, smoke alarms, and gas safety certificates. They are also supposed to carry out necessary maintenance on the property. You should note that this obligation only covers the natural wear and tear of the building. You can repair things that are damaged by the tenants, but they will have to cover the cost of the repairs. This can be done by simply making a deduction in their deposits.
You need to carry out thorough research before making an investment in buy-to-let properties. Some things you need to consider include the rental yield of the property, your potential tenants, the maintainability of the property, and your legal obligations. You should also research the area to determine whether you would get many tenants.