The unprecedented state of the UK economy may have prospective landlords questioning whether now is the time to invest in property or not. But, whilst mortgage rates have risen and the stamp duty on buy-to-let’s incurs a 3% surcharge, property will still yield better results than any other investment over the long term.
Not only will you receive a monthly income from your investment, with private rental prices having increased by 3.4%; but property increases in value over time, with house prices having increased by 8.7% YoY to date, so will prove a worthy nest-egg for your future.
Before you take the plunge, here’s 4 things you need to know:
1.Finding the right property can take time
It’s important that when you’re looking for your first buy-to-let property, you’ve taken every influencing aspect in to consideration, including:
- What type of tenant you’d like (e,g, student housing (HMO*), private tenants etc…)
- Yield/Return on investment
- What maintenance the property will require
Some properties, particularly apartments, can incur yearly maintenance fees or service charges, which can affect the annual return on your investment. Be sure you’re aware of all the facts before deciding to make an offer.
The rental yield is how much profit you make from your property in a year, as a percentage of its value. To calculate rental yield, you’ll need to take your annual rental income and divide it by the value of the property.
For example, if you receive £12,000 a year in rent on a property worth £200,000, you’ll need to divide 12,000 by 200,000 and multiply the result by 100 to get the percentage. In this example, your yield will be 6%.
Broadly speaking, a yield of more than 5% should give you sufficient scope to make income from your property while taking the costs of routine maintenance into account.
*HMO’s have a different set of rules and regulations to follow when compared to a private rental. You can see them here.
2.Get your finances in order
Much like knowing whether you’ll be responsible for paying a service charge for the building your buy-to-let resides within, you need to assess all of your finances. You’ll need to consider:
- Buy-to-let mortgages
- Stamp duty
- Insurances (like Landlord Insurance)
- Wear and tear/maintenance costs
- Agency fees
- How you’ll cover any void periods (periods without a tenant)
3.Know your rights and responsibilities
Being a landlord comes with a barrage of legislation, responsibilities, and licensing. A good letting agent will ensure that you’ve met all the requirements before a tenant moves in to the property, but you should still do your homework and be confident in your own knowledge too.
Some of the requirements you’ll need to brush up on include gas safety, electrical safety, fire safety and energy efficiency. You can get more information on the responsibilities of a landlord here.
4.Choose an agent wisely
Letting agents will typically offer a range of services from rent collection to full management of your rental property (including dealing with any maintenance issues). Choosing wisely doesn’t mean finding the agent that offers the highest level of service for the cheapest fee. As a first time landlord especially, you’ll need an agent who offers proper guidance and is fully accredited.
Some questions you should ask when researching agents:
- How do you help me choose a tenant?
- What checks do you conduct?
- What levels of service do you offer?
- How will you market my property?
- What are your policies on repairs and maintenance?
For more information on becoming a landlord, including buy-to-let mortgages and insurance, contact our lettings team on 01243 836055 or email email@example.com.