Buy to let is based on the idea of renting out a property you are buying or have bought as a means to create an additional income or to pay the mortgage with the rental income.
There are a lot of things to consider when moving into the buy to let market and a number of associated risks that should be considered before you make an investment.
Are you getting a good price on your property purchase and will the rental income cover the repayments?
In todays climate the best way to get a good price on your investment property is to buy from auction. This will however require ready cash, so is not a suitable option for everyone.
Due to the economy there are a high number of repossessions that you can buy at reduced prices. These will be ideal for your buy to let portfolio. Buying at a low price will ensure that your rental charges will cover the costs of your purchase.
If you are not in a position to buy at auction and are purchasing with a buy to let mortgage, do your homework! Research the area you are buying in and see what other similar properties are selling for. Calculate what your mortgage repayments will be and what rent similar properties to your are charging to make sure that your rent will cover any mortgage repayments. Make sure your numbers are correct and plan for all eventualities to make your buy to let purchase a success.
How will you find tenants?
Finding tenants can be done in a number of ways depending on how much time you wish to devote. Many buy to let landlords will use an agent to find tenants, arrange and carry out viewings, vet potential tenants and manage rental payments and ongoing issues. This will usually involve an initial fee and a percentage of your monthly rental cost. If you are looking for a hassle free way to rent out your property and the income from rent will cover any agents fees, then this option may be for you.
You can also find tenants without having to spend money by placing ads in local papers, online and in the property window. This is a more hands on approach as you will be dealing with the tenant yourself, however if the budget is a tight then this is a good way to start.
Will you be able to afford to keep up repayments if you have no tenants in the property?
This is a major consideration and should be carefully thought out before you take on a buy to let property.What will you do if your property does not have a tenant and you are not receiving rent?
What if you have a tenant who does not pay you on time? Can you afford to make the mortgage repayments and take these on as an additional expense until you start receiving rent again. If you do not have enough of a disposable income to cover mortgage repayments for any unforseen circumstances, then maybe buy to let is not for you. Remember, failing to keep up repayments on your mortgage can end in repossession.
Do you have emergency funds to carry out any repairs required on the property?
As a landlord you are responsible for the upkeep of the property and you must ensure that it is in a good state of repair for your tenants. If there is a leak or a problem with the boiler or heating, then you are liable. Do you have the means to take care of any repairs that need carried out?
Replacing a boiler or fixing a leak or electrics can be expensive business, so make sure you have a contingency fund so that if the worst should happen, then you can get the problem resolved efficiently.
Are you ready to make a long term commitment?
Are you in it for the long haul? The days of property prices doubling in a year are over (at least for now!) so are you committed to look after your investment for the duration of your mortgage or until at least you have available equity. If you are successful in your buy to let venture, you will have an asset which will create a monthly income for you once the mortgage is paid off, so it will be easy money in the bank. Keep focused and make sure the property is always let, and keep those repayments on time. Nothing is easy, but with planning and determination, one day you can make your buy to let pay.