Buy-to-let property investment can look like a very attractive way to make money, especially when we are seeing excellent growth in UK house prices. But if you are thinking of taking the plunge into property investment you need to understand the dangers as well as the benefits. Here are seven tips that will make it easier for you to make money for a buy-to-let investment.
Do your research and understand your customer
There is no substitute to the benefit you can get from extensive research of the market. Remember that this is your money you are investing, and while property is one of the safest kinds of investment, it is still possible to make the wrong move and put yourself in a difficult position.
Some types of property will always be popular. First-time landlords often look to relatively cheap in-demand types of home like two bedroom flats, which are sought after by couples and young families. Take a look at what types of property are most popular in your chosen area before buying.
Understand the challenges
There are many advantages to investing money in property but that doesn’t mean that it is without risk. Ask anyone who invested just before the financial crash and they will be happy to discuss the potential problems with putting money here. There’s no suggesting that the property market is set for those kind of large scale challenges any time soon, but it’s still important to know the dangers that come with buy-to-let investments.
The cost of repairs, for example, can mount up rapidly, especially if you have a portfolio of properties – it can sometimes seem like you are constantly having to spend money to have things fixed or improved. You should also speak to landlords in the local area about local pitfalls and challenges.
Don’t rely on price rises
With property prices in the UK currently on an excellent upward trajectory it can be tempting to base any profits from your investment on what you hope the property will be worth in the future. However, the property market can be fickle and changeable, so rather than gambling on property prices, you need to have a stable plan that pays off over time. That means that any rise in the value of your property can be a bonus rather than a necessity.
Get the right insurance
Insurance is one of those things that can seem like an unnecessary expense to a first-time landlord, but nothing could be further from the truth. It’s an unfortunate fact of life that things do go wrong and the more buy-to-let properties you have, the more likely you are to experience something difficult. That’s why getting the right landlord insurance is absolutely essential. Don’t take the risk, even if it’s only for a short time; one of the first things you need to do after purchasing is to take out appropriate insurance.
One of the most common questions that budding buy-to-let investors ask is whether it’s a good idea to diversify or to specialise in the marketplace. The right answer to this will likely depend on you and way you like to work, but in general you are likely to be better off if you choose one area and stick to it.
If you are able to become a specialist in a certain type of letting you are able to bring genuine expertise to the business. Equally you will likely find that any challenges are similar if you have the same sorts of buy-to-let property. This can make it easier to prepare for problems and overcome them.
Decide your level of involvement
Buying the property is only one part of the process. You need to then consider how much involvement you want to have as a landlord. Do you attempt to let the property to yourself or do you let an agent deal with it? Agents will deal with problems and run the day-to-day management of the let but they will charge a fee – will this eat too much into your profit margin? If you are going to do it yourself, once again it can’t be stressed enough that you should do as much research as possible.
Find ways to boost returns
One of the great aspects of investing in property is that there are things that you can do to your investment to make it worth more money. You should always be aiming to do any work that you can in order to raise the value of the property. Not only will this allow you to let it at a better price but it will also contribute to its overall value if you decide to sell.
Sara Bryant, working on behalf of Prime Centrum, Letting Consultants who were consulted over the content.