Important Things to Check When Buying a Buy to Let Property
Opting to purchase a property for the express purpose of letting it out as an investment or income source is quite a popular option because it can yield good results, and over time provides a sold income that can augment a retirement plan. There are some things you should consider when you are buying a buy to let property, so let’s have a quick look at them now.
Consider the Financial Returns
Understanding what the benefits to you will be both long and short term are a critical part of knowing if a buy to let (BTL) property is the right investment for you. Many things will influence this, but at the core, you want to make sure the rental payments are going to cover the bond repayments and the potential return is worth the time and effort of investing in the property. In general, if you’re applying for a bond, the bank will look for a potential monthly income of more than the bond repayment. A good rule of thumb is that the banks will expect the rental cost to be at least 125% of the bond repayment amount. You can also expect that the interest rate will be slightly higher on a buy to let property, as banks consider them more high risk than regular bonds.
Understand the Costs
The bond costs are just the start of your expenses when you’re buying a buy to let property. Other expenses need to be paid on the property, starting with things like building insurance and levies if the property is in a complex. If you go through an agency to let the property, there will be the letting agent’s fees too. These costs can quickly eat into your potential returns so need to be understood and planned for. While you’re factoring in these costs, remember that there might be months where you don’t have a tenant or the tenants don’t pay their rent on time or at all, so you need to be able to cover these costs too should they arise.
Choose the Right Area
Now that you’ve considered the costs of the bond and other expenses, you need to find the right area so that your rental costs are going to be enough to cover everything. The simplest way to do this is to look for other rentals in the area and see what they are being advertised for. Compare these to your potential properties and factor in things like the number of bedrooms, bathrooms and other areas, as well as the parking situation (garages, off street or on street parking). All these factors play a part in how desirable the property is and what you can get for rental. A letting agent might be able to help you with this if you are planning on using one.
Get Everything Checked
Once you’ve found a suitable property and considered everything else, you’ll want to make sure that everything is in working order in the house. That means getting the plumbing, structure and electrical wiring checked by professionals. Trade Facilities Services has you covered on the electrical front and can thoroughly check and test all the electrics in your buy to let house before you pull the trigger on purchase. You’ll receive an electrical safety certificate to provide to your tenants too.
Buy to Let properties are popular for a good reason and can be a great investment and source of income without too much work and calculated risk. With all your due diligence done and your new property purchased, it’s time to advertise the availability and find some tenants to occupy it so you can start your new vocation as landlord.