Buy To Let Checklist
Being a landlord is one of the best jobs there is – for the simple reason that you don’t have to do anything. Provided you’ve found yourself a good agent and a good property, the business will take care of itself – your free time is not a resource you need to spend and you can often expand your property portfolio simply by selling those properties whose value has risen and buying new ones.
For this reason, many are interested in starting out in the buy-to-let business. But what’s actually involved in starting? In this article, we’ll see if we can find out.
Decide a strategy
As a landlord, you’ll be making money in one of two ways. The first is known as the yield, which is the difference between the rent you’re being paid by your tenants, the money you’ll have to spend keeping the property functioning properly. The second is known as capital growth, or the amount by which the value of the property rises whilst you own it.
One of the first decisions you’ll make is how you intend to principally make money. Though most strategies will fall somewhere in the middle, there are extreme cases where certain properties can swing extremely far in one direction or another.
Decide a location
You choice of strategy will largely be determined by where you choose to invest. For example, the north of the country is home to rental properties which yield huge profits through rent, and yet whose value is relatively stagnant. Conversely, the capital is home to properties whose value swells periodically, but which yield paltry rents – sometimes landlords opt to make a loss on their rent in the hope that the price of their portfolio will shoot up. Those looking to pursue such a strategy will need a strong financial base to work from in order to absorb the short-term shocks, but the long-term results can often justify the approach.
Most landlords are looking to rent to professionals, for a number of reasons. In brief, professionals can be relied upon to pay the rent on time and to refrain from trashing the place, and to stay put for a considerable amount of time. Since professionals make the best tenants, it’s often best to focus on smaller towns on the outskirts of major conurbations, where such tenants are apt to stay.
Negotiate the best possible deals
Of course, prospective landlords will want to secure themselves their property for the lowest possible price. The market, in its current state, is not so amenable to this – often you’ll need to simply take what you’re given and like it. Adopting a more aggressive stance – suggesting an unrealistically low price point and refusing to budge from it – is unlikely to be successful.
Obviously, it’s best to research a property thoroughly before investing. Whilst new builds might appear to offer fantastic returns, and the sales office might be entirely persuasive, it’s worth bearing in mind that the people running the sales office aren’t working in your interest – it may be the case that they’re not being entirely honest about just how wonderful the property is.
Don’t take anyone’s word for it when it comes to potential rents. Speak to an impartial third party, or a website in order to shop around the area. It’s helpful to build up a database of reliable contacts from which to solicit informed opinion whenever you’re thinking of buying a new property.
Learn about paperwork and the ARLA
To put it mildly, the amount of legislation you’ll have to deal with as a landlord is considerable – and what’s more, it’s always being added to. It’s beyond the scope of this article to cover it all in detail, but you should certainly look at the ARLA website. ARLA, or the association of residential letting agents, are an organisation to which thousands of offices belong. Membership confers many advantages, the most notable of which being that licenced ARLA agencies are covered by a money protection scheme, ensuring that you money is safe if anything should go wrong.
Those first few steps into the world of buy-to-let can be daunting ones, but if you’ve been diligent in your research then there’s no reason that your stay in that world shouldn’t be a long and prosperous one. Provided that you’re careful where you need to be, you can avoid the many pitfalls that new landlords fall into, and enjoy a long and fruitful career as a landlord.