How to Buy to Let

1. Research the market

If you are new to buy-to-let, what do you know about the market? Do you know the risks, as well as the benefits? Make sure buy-to-let is the investment you want. The best buy-to-let mortgages have become much tougher to get following the credit crunch, but deals still exist. If you are looking to invest in property – give us a call to find you a FAB Investment

2. Choose a promising area

Promising does not mean most expensive or cheapest. Promising means a place where people would like to live and this can be for a variety of reasons. Where in your town has a special appeal? If you are in a commuter belt, where has good transport? Where are the good schools for young families? Where do the students want to live?

3. Do the maths

Before you think about looking around properties sit down with a pen and paper and write down the cost of houses you are looking at and the rent you are likely to get. Traditionally buy-to-let lenders want rent to cover 125% of the mortgage repayments, although many had relaxed this in recent years. Most also looked for a 20% deposit, which protects against falling prices. But in the wake of the problems in the mortgage market many are now demanding 30% deposits, or even larger, for rates considerably above residential mortgage deals. The best rate buy-to-let mortgages also come with large arrangement fees.
Will your investment work out? What will happen if the property sits empty for a month or two? Make sure you talk to FAB HOMES to find tenants quickly and efficiently.

4. Shop around

Do not just walk into your bank and building society and ask for a mortgage. It sounds obvious, but people who do this when they need a financial product are one of the reasons why banks make millions in profit. If you are looking for advice consider using a specialist buy-to-let mortgage broker. Remember asking them for information means you are under no obligation to use them. FAB HOMES have access to several brokers who would find the best deal for you!

5. Think about your target tenant

Instead of imagining whether you would like to live in your investment property, put yourself in the shoes of your target tenant. Who are they and what do they want? If they are students, it needs to be easy to clean and comfortable but not luxurious. If they are young professionals it should be modern and stylish but not overbearing. If it is a family they will have plenty of their own belongings and need a blank canvas. It is also possible to take out an insurance policy against your tenant failing to pay the rent. This can cost as little as £50, and is available as a standalone product from a specialist provider. Feel free to ask us for more details.

6. Don't be over ambitious

We have all read the stories about buy-to-let millionaires and their huge portfolios. But the days of double-digit house price rises are gone, so experts say invest for income not short-term capital growth.
Rent should be the key return for buy-to-let. Most buy-to-let mortgages are done on an interest-only basis, so the amount borrowed will not be paid off over time. If you can get a rental return substantially over the mortgage payments, then once you have built up a good emergency fund, you can start saving or investing any extra cash.
Once mortgage, costs and tax are taken into account, you will want the rent to build up over time and then potentially be able to use it as a deposit for further investments, or to pay off the mortgage at the end of its term. This means you will have benefited from the income from rent, paid off the mortgage and hold the property's full capital value.

7. Consider looking further afield

Most buy-to-let investors look for properties near where they live. But your town may not be the best investment. The advantage of a property close by is being able to keep an eye on it, but if you will be employing an agent anyway they should do that for you.
Cast your net wider and look at towns with good commuting links that are popular with families or have a sizeable university.

8. Haggle over price

As a buy-to-let investor you have the same advantage as a first-time buyer when it comes to negotiating a discount. If you are not reliant on selling a property to buy another, then you are not part of a chain and represent less of a risk of a sale falling through. This can be a sizeable asset when negotiating a discount. Talk to us, we might be able to help with advice and methods through experience. Buying or selling a home? We can save you money

9. Know the pitfalls

Before you make any investment you should always investigate the negative aspects as well as the positive. House prices are falling and if this continues, will you be able to continue your investment? Even in popular areas properties can sit empty. One rule of thumb many buy-to-let investors apply is to factor in the property sitting empty for two months of the year – this gives a substantial buffer. Homes often need repairing and things can go wrong. If you do not have enough in the bank to cover a major repair to your property, such as a new boiler, do not invest yet.

10. Consider how hands-on you want to be

Buying a property is only the first step. Will you rent it out yourself or get an agent to do so. Agents will charge you a management fee, but will deal with any problems and have a good network of plumbers, electricians and other workers if things go wrong. You can make more money by renting the property out yourself but be prepared to give up weekends and evenings on viewings, advertising and repairs. If you choose FAB HOMES as your agent, you will save money and gain access to our expert knowledge, excellent service and personal commitment.