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The Essential Guide to Becoming a Successful Buy to Let Landlord
Filed under ArticlesDec 2Anyone with an ounce on intelligence can become a buy to let landlord. It isn’t difficult providing they have the capital spare to pay the deposit on a suitable property. Even so, not everyone who invests in the market becomes a successful buy to let landlord. A lot of first time investors in the buy to let market slip up on little details, but it is the details that make the difference between success and failure.
Although quite brief, this guide is designed to help first time investors not only find the right property but also find the right tenants. It is split into two sections; the first explaining how to research, find and buy a property and the second explaining how to let it successfully.
Section 1: Finding and Purchasing a Buy to Let Property
– Decide on the sector of the market you want to target – The first thing you need to do before anything else is decide what type of tenants you want to target. So for example, are you interested in letting your property to families, young professional couples, students, singles or even retirees who have maybe sold their property in order to fully enjoy their retirement? By choosing a sector of the market now it makes it much easier to locate a suitable property later on.
– Research the average price of the type of property you’re looking for – Let’s say you decide to invest in a property aimed at professional couples. You need to research the average price of properties on the market that could be used for such a purpose. Look at different areas and different types of property e.g. flats, one bedroom houses etc. and check you can afford such an investment. You might also want to look at the average rental prices of similar properties for future reference.
– Check you can secure a buy to let mortgage – The easiest way to do this is via a specialised mortgage broker. By supplying a few details and proof of the deposit you have, a mortgage broker will let you know whether you qualify for a buy to let mortgage in principle. You might have to pay a small fee but it can save a lot of heartache and wasted time later on.
– Conduct detailed research to find a suitable property – So, you know what type of tenants you want to attract, you know the average price you’re going to pay for a property and you know, in principle, that you will be approved for a buy to let mortgage. Now you need to find a suitable property. Using the example above, a professional couple will most likely want a flat or house in a quiet area, close to public transport routes and shops, with good broadband options and maybe a dedicated parking space or two. They won’t necessarily be bothered about the quality of the local schools or whether there are parks nearby. Concentrate on the amenities that your desired tenants will be looking for as well as the condition of the property itself.
– View all potential properties at least twice – It is vital that you view all suitable properties once during the day and once during the evening. Daytime viewings will give you an idea of how noisy, busy or quiet the area is by day, in addition to showing you the condition of the property as it will be when purchased. During this visit consider the amount of work that will need doing e.g. decorating, refurbishment etc. and the cost. Then ask if you can visit again during the evening; just to make sure the area doesn’t turn into a noisy, unattractive place by night.
– Arrange your buy to let mortgage – For this you can either return to the mortgage broker you used previously or you can contact individual mortgage lenders in person. It is important to remember that buy to let mortgage lenders will never lend more than 75% loan-to-value and most only lend 60%. This means you will need a deposit equal to at least 25% of the property purchase price and maybe as much as 40%.
Section 2: Successfully Letting a Buy to Let Property
– Complete any work that needs doing to the property – Rental properties are much easier to let if they are in good condition. Try to make the décor as neutral as possible and the bathroom/kitchen clean and tidy. You might also want to consider supplying white goods. Remember though that you will be paying the mortgage while your property is without tenants so don’t take longer than necessary.
– Find suitable tenants – There are two main ways to find tenants: You can advertise and conduct viewings yourself or you can pay a letting agent to find suitable tenants for you. If you choose to find tenants yourself you should definitely consider using a tenant application form in conjunction with a guarantor form. These forms not only allow you to ask potential tenants about their rental history, occupation and salary etc. they also give you permission to run a credit check on both the tenant and anyone who agrees to stand as guarantor for them. A letting agent will conduct exactly the same checks for you but obviously at a cost.
– Sort out all necessary documentation – So you’ve found suitable tenants and they are happy to rent the property. Now you need to make sure all documentation is legal and correct. At the very least you will need:
1) An assured shorthold tenancy agreement – you can either write your own or download a standard agreement from the internet and amend it as necessary. 2) Details of your chosen government authorised tenancy deposit scheme – once the deposit has been entered into the scheme you should provide your tenant with proof of such. 3) A signed, dated and witnessed guarantor form (if required).
– Arrange suitable landlord insurance – To fully protect your property, contents, fixtures and fittings you really need landlord insurance, as opposed to normal buildings and contents cover. Landlord insurance covers all the basics plus it offers additional benefits such as property owner’s liability insurance and the cost of lost rental payments in the event of your tenants having to move out after an insured incident.
And that is about it…
The only thing then left to decide is whether you want to manage your buy to let property yourself or put it in the hands of a property management agency. If you do it yourself you need to make yourself available to your tenants at all times, even if it means relighting the boiler in the middle of the night. If, on the other hand, you decide to use a management agency you need to be aware that they normally charge between 8% and 10% of the rental price as fees – they do however take care of all tenant complaints for you.
So, follow the guide above and you will have everything you need to start on the path to becoming a successful buy to let property investor.