Buy-to-let property investment is one of the more popular forms of investment these days. While not the most accessible option, it’s slow-paced and has very little risk compared to stock trading and other methods. Although it may be appealing, it’s a big mistake to get involved in property investment thinking that it will be easy. To help you out, here are some golden rules for buy-to-let investment.
We’ll start with the most basic rule: location, location, location. The area you choose to invest in will have a huge impact on your overall returns. Contrary to what you might think, the quality of an area has very little to do with the price of property. You should be focused on targeting a location where tenants are going to want to live. When looking at a town or city, think about which residential areas have a unique appeal. Where are the best schools? How convenient is the centre and travel facilities? These and other questions are simple, but should never be overlooked. Your tenants are going to be less concerned with prestige and more with their quality of life.
You should always do some maths concerning your current situation and the revenue you’ll make. Before you go to a single viewing, find out about the kinds of property you’ll be able to afford, and the rent you’re likely to get out of them. If you’re like most buy-to-let lenders, you’ll want rent to cover 125% of your mortgage payments on the property. This warrants a deposit of 25% or even higher in some cases. Once you’ve worked this out, you’ll have to figure out whether or not the investment works out in your favour. This is where you have to think about your responsibilities like maintenance costs, and what will happen if the property is empty for a few months. There are a lot of factors that can affect your personal gain in property investment, so make sure you understand them.
Finally, take your time looking for a mortgage. If you walk into your bank and simply ask for a mortgage, then you won’t have much choice at getting the one that’s right for you. You’ll most likely end up tied to one which is better suited to private owners who are looking to settle in their home. When you need a mortgage for a targeted property, then it pays to broaden your horizons. There are many independent brokers out there who specialise in mortgages for buy-to-let investors. If you can start liaising with one of these, all kinds of opportunities will open to you. They’ll not only be able to point you towards the best deals, but also help you decide which one is best for you. Be a little wary here though. Remember that they’re gaining from the mortgage, and may end up giving you a raw deal.
As you take your first steps into property investment, remember to keep these rules in mind. This will help you avoid any big catastrophes before you’ve properly started.