Investing in a buy-to-let property
Recent reports show that the buy-to-let market is booming again. If you’re thinking of buying a property to let, do your sums and be realistic. Speak to a mortgage lender or broker to finalise your budget and borrowing costs, and then itemise all of your other outgoings. These can include a letting agent's fee, the charge for each tenant's deposit to be held in a government approved scheme, and so on.
Insurance also needs to be factored in and the type of policy. There are some which will pay your rent if your property is uninhabitable and the tenant needs to be housed elsewhere. On top of this you'll need to make assumptions on how much general maintenance will be required each year, how many void weeks you may have, and also build in a buffer if interest rates do go up.
Once you know your outgoings, you need to calculate your realistic rental income. When working this out, ask several letting agents for rental estimates - don't rely on a rental estimate from the estate agent who's trying to sell you the property.
As well as gross rental yields, the second element to consider for a property investment is capital growth potential. Buying a property outside of central London can give very high rental yields, but often your capital growth prospects are limited. Capital growth prospects rely on you buying in a good (or up and coming) area and ensuring that the property has good transport links.
If a tenant stays for more than a year in your property, some of your annual costs will reduce in the second year so it's much more cost effective to keep a long term tenant than have them changeover each year. Therefore, keeping a good tenant happy is key to maximising your return.
Once you've done all of this to check the investment actually stacks up (many don't), then you can turn your attention to maximising the appeal of the property to tenants.