Buying houses to rent out is a very popular investment in the UK, as it can provide a stable and reasonably high level of income depending on how many properties are in your portfolio. If you’re just getting started with buy to let though, it can be difficult to know exactly what you need to do and the steps you should take in order to be successful not just with the first buy to let property you buy but with any more that come after too. That’s why we’ve put together this guide of top tips for buying a house to rent.
Make sure you fully understand buy to let
A lot of time and money goes into a buy to let property investment, so you want to be sure that you have done your research and fully understand how the process works and what pitfalls to avoid. Not only that but there are serious legal implications involved in buying a property, it’s not as simple as just buying a house and renting it to someone.
If you don’t meet your requirements as a landlord, you could be committing a criminal offence and face severe repercussions. Speaking to expert solicitors with extensive knowledge and experience in residential conveyancing will be very beneficial if you want to know more about buy to let.
Once you know more about the process itself, you should also carry out some research into the current buy to let market. The property market is constantly changing, and you should make sure that you’re prepared for the fact that the value of the property you buy could drop as well as increase. Other investment options and savings accounts will likely be less risky for your money. However, there’s nothing more rewarding than putting work into a house for good tenants to live in and enjoy, and being a landlord fits some individual’s lifestyles.
Buying properties and renting them out has done and continues to work out well for many investors across the country in both income and capital gains. This is only achieved through hard work and a very detailed knowledge of what is involved as well as accepting the possible downs not just the ups. The more research you can do and the more you learn about buy to let, the better the likelihood is of your investment being successful.
Do all your calculations
Unlike when you’re working out the finances to buy a house for yourself, there is more involved for buying a rental property. Firstly, buy to let mortgage lenders often demand higher deposits than for a normal house purchase as they expect the rent you get to cover between 125% and 150% of the repayments. Not only this but in comparison to standard residential property mortgages, buy to let mortgages also have bigger arrangement fees attached.
Aside from the price of the house itself and the mortgage, you also need to think about the insurance you’ll need, stamp duty land tax, maintenance costs, and more. Yes, you could get a consistently good income if you get long-term reliable tenants in quickly, but what about if the house is left empty for a little while? Can you afford to keep things ticking over until you find suitable tenants? The cost implications in buying a house to rent can be very steep so it’s vital that you breakdown your finances in detail and everything you will need to pay for to ensure you can comfortably afford to commit to a buy to let investment, even during times when the property might be vacant.
Carefully consider the location of the house
Don’t rush in and just go for the first or second house you see without considering the area it is in. You don’t have to only look at properties that are close to where you currently live (although it will be helpful if you intend to be a hands-on landlord). Look into locations that tenants will want to live in, such as if it has good transport links, schools for young families, plenty of activities and shops, restaurants etc.
Typically, a lot of investors do tend to choose investment houses that are close to where they live as they know that area best. This will help you find properties that you can feel confident about in terms of attracting the type of reliable tenants you want for the long term. However, to balance the argument, if you already own a home and live in an area, you’ll likely know about all the available property potential in that location. So, branching out to find the right buy to let investment property for you can’t hurt as long as you do your research into a location to see the potential in it.
Finding the right tenants
So, you’ve found the right property in the right location, now you just need the right tenants. Tenants can come from a range of backgrounds and circumstances so it’s important to try and imagine who they could be and cater the property accordingly to appeal to them.
For example, if the property is in a student populated area, students are often looking for something clean and comfortable, but value function over luxury. Whereas a young working couple or a family will want a bit more than just the basics, as well as the freedom to personalise the house to their style and preferences to make it feel more like their home.
Allowing them to do this will ensure they are happier and content in the property and will stay longer as a result. Having a clear idea of who your prospective tenant is likely to be based on the area and type of property you have will help you generate interest and get the house rented as quickly as possible.
Don’t be afraid to haggle to get the best price
Like first time buyers, buy to let investors are in a strong position to negotiate on price, as they aren’t in a chain and won’t be depending on selling one house to buy another. This can be very advantageous, as you can start on low offers, but don’t let yourself be convinced to overpay for a house. It easily done when it’s your first time buying a property to rent, and you don’t fully know the ropes yet.
Knowing the market in detail will pay off for you again when it comes to getting the best price on a property. If you know that houses are taking longer to sell for example, you can grab a great deal from an owner who is keen to make a sale happen if the property has been on the market for a while. Also, try to get more of an insight into the seller, how long they’ve owned the property, the reason for selling etc as this could help you with haggling.
Those are the top five tips for buying a house to rent, hopefully you have found them useful in getting to grips with buy to let and how to be successful with it. If you’ve found the perfect property and are looking for professional and efficient property conveyancing in Cramlington, Toomey Legal are here to help. Our team know the world of residential and commercial conveyancing inside out so are placed to guide you through the process and complete your property purchase or sale smoothly. Contact us today to discuss your needs and ask any questions about our conveyancing services.