Buy-to-let property investment has always been a popular choice for those who would rather have tangible-real world assets that they can control and preserve themselves than shares in an unpredictable stock market. However, no investment is fool-proof, and you need to work to build and protect your buy-to-let nest egg. The following tips may help you do just that.
1) Research the local property market carefully.
Especially if you are new to buy-to-let investing, you need to learn the risks of the rental property market in your area.
Areas with high property values, for example, may be more vulnerable to housing market fluctuations. Areas with low values may attract renters who are less than careful with your property. Whenever possible, talk to someone in your desired area who already owns a buy-to-let property, and find out what their experiences have been.
2) They aren’t just assets, they’re homes.
Even in a profitable area, each rental property should be seen as unique – these are not simply financial assets. Each one will be someone’s home, and their ability to make you money depends on their desirability as a place to live.
On the other hand, you do need to be aware that there are many different types of families and individuals in today’s rental markets, and a home that may not be desirable to you might be perfect for a large segment of the market – don’t overlook properties just because they aren’t to your tastes!
3) Don’t accept just any mortgage.
Many first time property investors only look at the mortgage offerings of a handful of banks or other lenders, and all too often choose to go with their own bank because they have a great deal of trust for that particular organisation.
You really, really shouldn’t do that. You absolutely need to shop around widely in order to get the best mortgage. Whether your buy-to-let is profitable at all could depend on just a percentage point of interest, or on a single ‘hidden’ fee. Make sure you get the best deal in an objective, numerical sense in order to gain the most from your investment.
4) Play it safe.
Everyone wants to be one of the ‘buy-to-let millionaires’ out there, but they are the exceptions and not the rule. All too many investors who are new to the market over-extend themselves trying to ‘grow their portfolio’, and risk losing everything to even a small market fluctuation or poor buying choice.
It is often safer to focus on choosing a small number of high-yield rental properties which will provide consistent returns rather than snapping up less desirable properties because little else is available.
5) Decide how ‘hands-on’ you will be before choosing a property.
Know whether you will be using a managing agency before looking at individual properties, because managing a property yourself is a very different experience to employing a property manager.
Agents charge a fee, of course. This will reduce your monthly income, but frees you of having to deal with day-to-day management. They can also arrange better rates with plumbers, builders and the like, making the whole operation more efficient.
On the other hand, managing a property yourself can be substantially less expensive, but may demand a great deal of your time. If you aren’t prepared to spend this time, your entire investment could be put at risk.