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Despite all the bad press that the buy-to-let market has, it can be a very successful business model if you do it right. However, to do it right, you need to do your homework.
Landlords should know what they need to do to make that business succeed.
First Steps
Before you start out, make sure that you research thoroughly, understand the market and what sort of tenant you’re aiming for, and seek some advice from people in the know.
Join a trade association like the National Landlords Association, and make sure you’re fully prepared.
Choosing the Right Location
It’s essential to pick a property where people want to live. From good schools and excellent transport connections to low levels of crime, there are lots of reasons why people might want to live somewhere.
Put yourself in the shoes of your target tenant, figure out what they might want and need, and then pick properties in areas that offer these things. For instance, if you’re looking to rent to a family, then you need to be near a good school.
If you pick the wrong location for your target tenant, then you will end up losing money because of it, as you will find it more difficult to find a tenant and there’ll be a longer period of having an empty house. You may also have to lower your rent to meet the expectations of your potential tenants and encourage someone in.
Picking the Right Mortgage
A competitive mortgage will help keep you costs down, and make it easier to make a return on your investment, so it’s important to really think about which mortgage is right for you. Success in property usually depends on having enough surplus rent and long term capital growth as opposed to short-term opportunities. It’s also advisable to consult with an Illinois mortgage broker if you live in Illinois. There are variants in details from state to state so if you’re in Boston, you’d want to speak with someone in Massachusetts.
The best mortgages often require a hefty deposit, preferably over 25% of the property purchase price. The bigger your deposit, the cheaper your mortgage will be.
Be a Bargain Hunter
Because you’re not part of a chain, there is less of a risk of the sale falling through. Use this leverage that you have over the seller to lower the price.
Choosing a Good Letting Agent
A good letting agent will take a certain amount of management away from you as a landlord, meaning that you are free to have a full-time job or commit to your family. Take a look at this guide from Simple Landlord Insurance for a comprehensive look at finding a good letting agent.
Vetting Your Tenants
If you’re lucky enough to have a good tenant, then letting can be a really rewarding experience. If you’re not, then it can be stressful, time consuming and ultimately profit-eating, as they will not stay long, and probably won’t pay their rent on time either.
Perform a credit check and ask for a reference and a proof of income. By vetting potential tenants, you are saving yourself time and money.
Purchase Insurance
One of the biggest cost savers when it comes to being a landlord is having insurance. A policy can cover you for damage to the property, loss of rent, having to find and pay for other accommodation in an emergency among many other things.
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