The Wriglesworth Consultancy recently revealed that over the past 18 years the typical buy-to-let property has made an astonishing profit of almost 1,400 per cent.
The most recent data suggests that the price of the average house is increasing by 5.6 per cent annually, while the average yield still sits in the five to six percent range. With the base rate of interest set by the Bank of England at a record low of 0.5 percent, there are very few investments that can match the yield available in the buy-to-let market at the moment.
With more and more of our clients approaching us looking to develop a buy-to-let portfolio that provides them with both a regular income and a long term investment, we thought we would share some pearls of wisdom we picked up over the years.
Location, location, location
It may seem obvious that you should choose the location of your buy-to-let property carefully, but there are a surprising amount of people who make a decision to purchase a property because it’s cheap, expensive or close to where they live.
You should choose your property using a business mentality. Think about its marketability and potential returns i.e. whether or not you think someone would want live there and how much of your investment you can recuperate through rent. It’s not a good investment if no money is coming in!
On occasion buying in the cheaper areas gives you a good return, for example if you buy a house for £50,000 but still get a rental of £550 per month this makes better business sense than paying £250,000 and getting £600 per month rental.
If the tenants then wreck the house then it may not matter as much in a £50,000 house rather than a house worth £250,000!
Key questions to ask yourself: Does the property have good transport links? What are the local schools like? Is it in a location where students want to live? Research is crucial to making a good investment.
Target your tenants
The way you present the interior to potential tenants will affect how easily you find it to let the property.
If they’re a student, aim for comfortable, simple and most importantly easy to clean – we all know that students traditionally don’t hold household chores in high regard.
If it’s a family home that you’re letting, then the tenants will probably have their own possessions to fill the property. Give them a blank canvas and allow them to make the property into their home. They’ll feel they have more invested in the property and are likely to stay for longer, which can only be a good thing for the buy-to-let buyer!
Properly protect your property
Becoming a landlord is never going to be a risk-free activity. Tenants may refuse to pay rent, the property may be targeted by thieves, a water pipe may burst; there are an almost countless number of ways that things can go wrong. That’s what insurance is for.
Landlord insurance is a fast growing industry, with an ever increasing number of specialist policies covering everything from the usual buildings and contents policies, to loss of rent, electrical appliances and boilers.