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Making property investment a profitable experience
 
Since the launch of buy-to-let mortgages almost 20 years ago, the market has experienced peaks and troughs.  However, with falling inflation keeping interest rates low; a relatively limited housing supply; and first time buyers continuing to struggle to make the first move on the property ladder, many would-be investors are considering buy-to-let as a serious option.
 
Added to that, forecasts would suggest that rents in the UK could rise by 2% in 2015 meaning buy-to-let investments could provide attractive returns without the volatility of stocks and shares. 
 
These favourable conditions, however, shouldn’t lull you in to a false sense of security and you won’t be able to simply sit back and watch your investment grow.
 
Last year alone, the team at Andrews helped over 7,000 landlords let their properties and each week we’re seeing in the region of 1,000 new tenants register to find a rental home.  On average the properties we let have 60%* shorter void periods than the UK average so we’re confident that we can guide new landlords on the right path to a successful buy-to-let investment.
 
Look to the future: first off you need to ask yourself what your investment goal is.  Are you expecting to earn a rental income from your investment or create capital growth with a potential future sale?  Are you able to have your money wrapped up or do you need to have ready access to it after a short time?  Do you need the rental income to support a pension income?  Discussing these points with an expert will help you to invest in the right property in the right place. 
 
Plan for the unexpected: whilst the market is buoyant at the moment and yields are strong, it’s not all that long ago that interest rates were much higher and property prices were dropping.  Will your finances support a rise in mortgage interest rates; can you afford for the property to be empty for up to two months each year; have you considered tenants not paying the rent; and have you planned for contingency to cover regular maintenance and unforeseen costs?  Simply, when becoming a landlord, you can’t rely solely on the ability to afford the property in the first place – you should aim for a rental yield of at least 125% of the mortgage repayments.
 
Tax needn’t be taxing: but it is a hot topic right now!  With property investment comes a responsibility to understand tax implications.  If necessary, engage with an independent financial adviser who can provide clarity on the best way to navigate the income tax implications of your investment and advise on capital gains tax if you plan to sell the property, or on inheritance tax should it impact significantly on your overall estate. 
 
Location, location, location: Kirsty and Phil are right about one thing, location IS important. Who is your ideal tenant and what will they be looking for?  Young professionals will seek different properties and local amenities to the student market, whilst young families will be keen to be near to reputable schools and nurseries.
 
How you plan to manage the property will also impact on location.  If you’re going to be hands on you’ll not want to travel a long way if the tenants need to see you – however, handing responsibility over to a managing agent may open up more profitable location options further afield. 
 
The type of property you invest in is also worth given due consideration to.  Local letting agents will be able to advise you on the type of property in highest demand and popular locations for these properties. They will also be able to give you an indication to the type of tenant these properties attract.  
 
Know your obligations: With all your homework done, assurance that the sums all stack up, and confidence that you’re investing in the right property in the right area, it’s still not time to sit back and relax.  There are a number of obligations that you’ll need to be on top of. Holding a gas safety certificate, maintaining electrical safety checks, ensuring smoke alarms are all in good working order, and investing in robust insurance policies will not only reassure your tenants, but protect you and your investment so that your buy-to-let experience is as positive, and profitable, as possible! 
 
For more information and guidance on becoming a buy-to-let property investor, sign up for the Andrews Landlord Newsletter which regularly provides tips, insights and updates on the latest legislative changes: https://www.andrewsonline.co.uk/sign-up
 
*Andrews’ internal data, Q4 2013. Based on available data for void periods from a representative sample of Andrews managed property stock
 
**David Westgate is Managing Director of Andrews Letting & Management 
 
David Westgate Blog
 

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