It’s no longer the “guaranteed” industry that it once was. In fact, many landlords have withdrawn from the game – suggesting that it’s now far too difficult to make a profit following big legislative changes.
However, get the big decisions right, and you can still be a success in the world of property.
Today’s guide is all about this, as we introduce four so-called golden rules that can maximise your chances.
Rule #1 – Understand your buy-to-let from your residential mortgage
This is a huge one; get it wrong, and the consequences can be huge.
Put simply; you can’t finance a rental property with a standard mortgage. If you do this, you will violate your mortgage agreement, allowing your lender to demand full repayment of the loan.
Instead, you’ll need a buy-to-let mortgage. Unsurprisingly, these agreements allow you to let your property and tend to have different affordability requirements. For example, rather than being based on your personal income, the lender will decide based on your rental forecasts.
Rule #2 – Location is key
In many ways, this rule is similar to the one that applies to homeowners; buy in the wrong location, and you’re likely to struggle to find tenants, or you may only be able to attract those willing to pay below-market rates.
To maximise your chances of success, you should focus on areas with high demand from renters. This might be a university town or city or somewhere with a high concentration of young professionals.
Of course, this doesn’t mean that you should only invest in these areas – there are other factors to consider, but it’s certainly something to bear in mind.
Rule #3 – Don’t skimp on the research
When you’re a landlord, you’re effectively running a business. As such, you need to approach your investment with a professional mindset and conduct thorough research before making any decisions.
This research should cover everything from the local property market to the potential rental income that you could achieve. You should also research the available tenancy agreement types and understand the rights and responsibilities of both landlords and tenants. Then, there are the costs. Sure, you might have considered the mortgage payments, but what about any landlord insurance obligations or licensing fees you might have to contend with?
Rule #4 – Resist the urge to do everything yourself
This final point doesn’t apply to everyone – but it’s certainly applicable to the majority of readers.
If you have ounces of time on your hands and a bit of experience, managing your lettings yourself might be viable. However, if you have any doubts (and don’t want to be woken up in the early hours by desperate tenants), it’s time to hand the reigns to a letting agent.
Another example might be with repairs. While you may consider yourself a dab-hand at installing wall shelves and other basic DIY tasks, how about doing this at scale? Again, it comes down to how much your time is worth and put simply, there are professionals that will make this much more cost-efficient for you.