Posted: 26 July 2013 by Higgins Homes
Buy to let is an exciting place to be right now and for those with the funds to finance a property purchase like this, it's a great time to do it. In Part 1 of this blog we looked at the basic considerations for taking those first steps into buy to let. In Part 2 we're getting down to the details:
1. Get familiar with the mortgage deals. This is the one area where you can ensure that you end up with a fantastic deal, or your entire investment can result in a miniscule profit for a lot of risk. Buy to let mortgage rates have been falling in recent times and some of the best deals are around 2.49% (two year fixed rate). However, look out for the fees â€“ the more mortgage you need, the higher the fee will be. For a 40% deposit you could pay around 2.5% in fees, which on a 250,000 purchase is a fairly substantial Â£6,250.
2. Target your tenants. When entering the buy to let sphere you need to think about your target market as this will influence the level of rent you want to charge, the design of the interior and where you choose to buy. For example, if you're targeting families then nearby schools and parking are key, whereas for young professionals you will need to consider local entertainment, transport and a higher end spec interior.
3. Don't just stay close to home. There is often a temptation among buy to let investors to purchase somewhere nearby, which in some ways does make sense in terms of being a hands on landlord. However, there are often better financial deals to be found elsewhere which after all is the objective of the investment and you can always use an agency to manage the property if it's not that convenient in terms of where you live. Don't be put off by properties that need renovating, just look out for areas with good transport links and those that have large local student, professional or family based populations.
4. Negotiate. You have to be fairly hard nosed when it comes to buy to let investment as it is, after all, a purely financial matter. If you don't think a property is worth the asking price then don't pay it. If you're being quoted hugely over the odds for building work and interior design then barter down the costs. And if the first few tenants who show interest in your brand new property don't want to pay the asking rent then stick to your guns until you find some who do (as long as you know you're asking a price that is market).
5. Go in with your eyes open. You might be excited about your buy to let adventure but you also need to be realistic about what could go wrong. If you can't rent the property, how long can you pay the mortgage yourself? What happens to your personal finances if the value of the property drops (because house prices have been falling) and what will you do if you can't remortgage? Are you ready to deal with the demands of tenants and do you understand what could go wrong legally if you don't meet the required standards? Whilst there's no need to be negative, realism as a landlord does require a degree of anticipating the worst and being prepared for it.
Higgins Homes is a property development company offering a range of attractive buy to let investment opportunities in London, Essex and beyond. For more information, and for help finding the perfect buy to let property, see our developments.