With a wave of new mortgage products for landlords that will provide a solid return on investments, there can be opportunities for those looking to become a buy-to-let (BTL) investor.
Over the past year the interest rates have dropped, making a significant difference to potential borrowers.
There are also indications that while the mortgage market is appealing to BTL landlords at present, there are still a number of novice property investors who are making common mistakes with their portfolios and finances.
Having a BTL portfolio does not automatically guarantee financial success and before entering the market, investors would be well advised to prepare a detailed business plan to prevent nasty shocks further down the line.
The following are just a few considerations potential investors should consider:
• Tenant demand: the first question to ask is what is the likely level of rental demand for properties? Thorough research on location and type of property which is most in demand needs to be done.
• Pricing: research your target market in terms of rental levels and what is realistically achievable, along with any anticipated increase in the future due to the cost of living.
• Purchase and ongoing costs: operating costs as well as purchase costs must be allowed for as this is the only way (once your rental income has been factored in) of calculating what your gross and net yields will be.
Remember also to allow for the inevitable times when the property may be empty, and also allow for a separate fund to cover repair and maintenance costs. Don’t forget professional fees and possible legal bills and be aware of the personal tax aspects of renting property too.
• Exit strategy: before committing, you should always consider your exit options – for example, will you be able to sell your property easily should you want to? It is worth noting that property is generally regarded as a longer term investment as it is less liquid than, say, equities, securities or commodities.
Our specialist advisers can guide you through all the advantages and disadvantages of being a property owner.