Buy-to-let properties are popular amongst property investors in the UK. There has even been an increase in overseas investors purchasing buy-to-let properties in the UK. Buy-to-lets are becoming a popular source of passive income for investors and a way of building a property portfolio.
Despite the UK’s recent tax rise that was put in place and the 3% increase in Stamp Duty Land Tax costs on buy-to-let property purchases, buy-to-lets are still an attractive option for property investors.
There are many reasons why someone would invest in a buy-to-let, but in order for it to give you the best returns you need to find the property with the best deal and the best prospects. If you are looking to build a portfolio with a buy-to-let property then you are probably looking to grow your wealth through property rather than shares or cash. Here are some tips that can help you make your buy-to-let investment successful.
- Do your research
A successful buy-to-let is only as good as the foundation. This means research. If you have a property in mind that is marketed particularly well, but doesn’t have good enough returns, it can mean that you won’t make as much profit or rental income as you expect from a buy-to-let. Buy-to-let involves spending thousands and taking out a mortgage. When house prices increase it means you will be able to leverage above mortgage debt but when it decreases your deposit gets hit and mortgage stays the same.
- Choose a fruitful location
A promising area doesn’t mean the most expensive or the cheapest. It is a place where people like to live. For buy-to-let property investment you should look for an area where there are many possible residents who can be your tenant. If you choose an area that is not promising – purely because the deal is cheaper – then you may experience devastating void periods, which can reduce your rental income and give you low annual returns. Ask yourself what the area’s special appeal is. Is it a popular commuter spot? Are there schools and shopping areas nearby? Is it close to a busy city with various amenities?
- Add it up
You should always do the maths with an investment. If you have a power team for your investments then consult your accountant. Write down the properties you are looking to get and the rental income you want to earn. Buy-to-let lenders look for the rental income to cover 125% of the mortgage repayments and many demand a 25% deposit. The rates are considerably higher than a residential mortgage. The best buy-to-let mortgages come with large arrangement fees. Also factor in the maintenance costs and any additional expenses to keep your property.
You should use these tips to get the process started. After that you should consider shopping around online, at auctions, through contacts, and even at high street estate agents.