The UK buy-to-let property market has witnessed some extensive changes over the last couple of years, making the market much more difficult to navigate than ever before, and even forcing some landlords to question their whole approach. Despite this, the UK buy-to-let property market is still a fantastic place to invest and, providing that you get the right property for you, it can still be very profitable.
With this in mind, if you are considering taking the plunge into the buy-to-let market or if you are an existing investor looking to make your next move, take a look at these top tips that are sure to help you along the way.
Research is essential
With all of the changes that have already happened, and for all of those that are set to come into play in the near future, it is important now more than ever to conduct your own research to ensure that you understand everything that you need to. You need to make yourself aware of changes to the financial side of your investment, including tax changes and how the investment may work for you in terms of income or profit, but also the responsibilities and obligations that you will inherit if you are to become a new landlord.
Once you have conducted your own research into the market and particular investments, you will be in a much better position to decide whether buy-to-let investing really is the right option for you. This part of the process should be one that you take your time with, and a good idea is to monitor any new updates or topics related to the buy-to-let market, considering how they may affect you and your potential investment.
Investing in the right property for you
More research is needed here, this time with a big focus on the property investment itself, rather than the idea of investing. You should research different property types in different areas, and consider how those properties may appeal to the tenants that you will be targeting it at. If the property is one that tenants will certainly be interested in and the numbers add up, it is probably the right property for you. If you decide to target a certain type of tenant before looking at properties, you should still consider what they may want in a property, make a checklist and look for properties that fit in with what you are looking for.
Focus on the location of properties
The location is a very important part of your investment. Firstly, the property needs to appeal to potential tenants, such as being near to schools, transport, shops and anything else that may appeal to them, as this will contribute to how much they want to live in your property. Another reason that you need to consider the location of properties, and arguably the most important, is the way that it may impact the financial aspect of your investment. Different locations are able to achieve higher rental income than others, based on a whole variety of different factors. You should look into how much income you may be able to generate from different property types in different areas, and use that information to make your final decision.
Calculate returns as a rental yield
The rental yield of a property is the main figure that you should focus on when looking at how much income you can generate from a property. The rental yield is the rental income that you generate as a percentage of the cost of the property, and is used throughout the buy-to-let property market. The best way to look at it is that a 10% rental yield on a £100,000 property would be a return of £10,000, whereas a 5% yield on a £250,000 property would be a return of £12,500. Although the second property with a yield of 5% returned slightly more income overall, the first property is a much better investment when you include the cost prices of the properties.
Search for the best mortgage deal
One of the biggest mistakes that investors make when looking to obtain a mortgage for their investment is that they simply walk into their bank and ask for a mortgage. Although you may be wondering how else you could get a mortgage, there are much better ways that will actually save you money. The bank will sell a financial product to you that may well be overpriced or that may not completely match what best suits you, so this is where you should take an alternative route.
As well as doing your own research, you should consult an independent mortgage broker as they will have expert knowledge and experience that will help to find the right product for you. The independent mortgage broker will discuss different options with you and will help you to find the best one for you, regardless of who is offering it. As well as working with an independent mortgage broker, you can also make use of free mortgage comparison sites, of which will show you the best mortgage products suited to you and your own circumstances.
Mark Burns is the managing director of property investment firm Hopwood House.