Buy to let tip for landlords.
Stop! Hearthstone’s buy to let tip article will help.
1. Do your research.
Before purchasing a buy to let, doing your research is hugely important. Investigate areas and choose a location with potential. Is it on a
commuter belt? Does it have a large student population? Does it have good schools and would therefore appeal to young families? If an
area has potential, what type of property would best meet the needs of your potential target market? For students, clean and comfortable would be suitable so spending money on high spec finishing’s would not be sensible. Research the rent ranges for different target
markets. For professionals or families check a property letting website like Right Move, Zoopla and Hearthstone; similarly, for students
check the local university’s letting agent site. Research your target area and market this will give you a much clearer idea of what property type is going to be an appropriate purchase.
2. Do the maths: financial planning.
The process and costs associated with purchasing a buy to let property is similar to buying a private home. Except on top of these
considerations you need to bear in mind if a particular purchase is a viable investment. Will the rent cover the mortgage costs?
and will the capital growth be sufficient for your needs and wants?
You’ll have to budget for buy to let mortgage costs, a deposit, legal fees and stamp duty; careful cash flow planning is needed here
because the monies going in and out of your accounts can be irregular. This is especially true if you are remortgaging another property to fund a new purchase. Additional costs to factor in are maintenance and repair costs and letting agent fees. You should also consider
if you’ll be able to afford 2 mortgages if the property is not let out for a period of time.
Hearthstone Ltd is ideally situated to help in this situation, our experience and knowledge means that often forgotten questions can be
highlighted and clarified. This may all seem designed to put off the inexperienced landlord, but it needn’t be difficult or overwhelming.
3. Rental income
Pay attention to this buy to let tip. While capital growth is what you may hope for over the long term, it is best to focus on ensuring your
buy-to-let mortgage repayments and other costs will be covered short term. Buy-to-let lenders typically want rent to cover 125% of the
mortgage repayments. New regulations now mean that some banks are asking an even higher ratio and many lenders now require at
least 25% deposit. Interest rates are currently very low and are likely to go up in the future; ensuring your rental income will cover
increased repayments is essential for a successful investment. To calculate your buy-to-let yield you can use one of the many online
calculators that can help estimate your rental property yields.
Finding the right property is key, this again is where Hearthstone is willing to help, keeping an eye on the market and highlighting
appropriate properties as and when they appear, we can even accompany landlords to viewings for that personal and professional
4. Be realistic about how hands on you want to be
The most important buy to let tip. Traditionally a renovation was a typical way to increase the capital of your new investment. Think! Do
you have the time to renovate a house? moreover, do you have the skills to coordinate contractors to do the work for you? Assess your
properties and be realistic about how much work needs to be done. A fixer upper was a good idea in the past, trade skills were relatively
cheap and easily come by. The loss of manual proficiency means that tradesmen and women are in huge demand and the price for their
labour and the materials needed have risen dramatically.
Another consideration; will you rent out the property yourself or do so through an agent? Hearthstone Ltd charge a small fee for our
invaluable services. We are experienced within the building industry to deal with most problems ourselves; for the occasions that
requires another helping hand, we will accompany tradesmen as problems arise. You will save some money by renting out the property
yourself, but the trade off is taking on a project that’s too big. Will cost you more money in the long run? Spending weekends and evenings arranging viewings or performing repairs inst everyone’s idea of fun. Be honest and realistic with yourself from the start. Do not under
estimate the time and effort it will require to manage your own buy to let.
5. Legal responsibilities
There are certain responsibilities you must meet as a landlord. Buy to let investments are considered a business, so you will have to
declare any income made to HMRC through a Self Assessment tax return. You will also need to ensure the property you let adheres to
current regulations, for example:
- Gas safety certificates
- Energy performance certificates
- Protecting the tenant’s deposit
- Fire resistant furniture
- Legionnaires disease checks
- Right to rent checks
- Landlord license
The government website www.gov.uk gives up to date legislation and especially relevant information.
6. Get to know your tenant
Above all else the number one way to mitigate problems is developing a good relationship between Landlord / Tenant / Hearthstone.
Contrary to popular belief, the relationship between tenants and landlords / agents isn’t always bad. Having a good
working relationship with your tenant is beneficial because they are more likely to take care of the property. Tenants are more likely to
renew their lease and stay in your property longer. At the outset Hearthstone strives to strike up a friendly and communicative
relationship with tenants, this isn’t always easy since we also need to manage a property which the landlord has invested heavily into and their requirements and wishes ultimately come first. Hearthstone has managed to find an appropriate balance which suits everybody.
Most of all, communication and honesty are the keys to a successful buy to let investment.
In conclusion, if you follow our buy to let tip page, you will be a successful landlord.