The buy-to-let phenomenon was highly profitable for many British property-owners until the credit crunch of 2007. Almost overnight, sound investments became millstones around the neck of over-ambitious investors, and many were forced to part company with their properties at a significant loss. However, the property market is slowly recovering; rental rates are on the rise, and property prices are still relatively low compared to the boom years. Now may be a good time to invest in a buy to let investment property, but there are some important factors to consider carefully before any funds change hands.
Perform Some Detailed Market Research
The main aim of securing a buy to let property is to make a healthy return on the investment. The monthly cost of a home-loan needs to be exceeded by the potential rent that the property will attract. This type of commitment should also be viewed as a long-term strategy, so there needs to be potential for a profit when it is time to sell the property. This information will only be acquired by carefully researching rental rates and house prices within the desired area. Investors should not be afraid to enlist the help of experts such as National Homebuyers Investments, as they will be able to draw on a large amount of knowledge and experience.
Select a Promising Area
Investors should try to locate properties that appeal to their target customer. For instance, family homes should be near a selection of popular schools, and properties intended for professionals should have access to excellent transport links. It is a great idea to stay in touch with planned developments in the area; a little research may uncover a development that will add value to the property in the future.
Do the Maths
Historically, buy-to-let lenders insist on potential rents that cover at least 125% of the mortgage repayments. However, these stipulations have been tightened by many financial institutions, so it is imperative that a true indication of a property’s earning potential is gauged. Investing in a buy to let investment property is still considered as risky by many of the mainstream lenders, so it may be necessary to find a 25% deposit. Investors should not fall into the trap of calculating the potential returns based on current interest rates, as they are currently at an all-time low. Forecasts should be made with steep rises in interest rates already factored in. This area can be a minefield, so enlisting the expertise and experience of specialists such as National Homebuyers Investments will ensure that a realistic indication of the potential for long-term returns is achieved.
Treat the Investment Like a Business
Managing a buy to let investment property should be approached in the same way as the running of a business. There will be costs to cover when maintenance and repair is required, so this should be factored into a business plan. The owner may need to employ a property management company if they are committed to long hours in their own job. In addition, the costs involved in the event of the property remaining empty for a period of time should also be taken into consideration. Any successful business requires the careful management of costs, and managing this type of investment is no different.
Purchasing a buy-to-let property is fraught with potential danger and it is a long term commitment that must be planned very carefully. A property investment specialist will be able to assist buyers in every aspect of their investment. From selecting the most suitable properties to forecasting the potential returns, a specialist such as National Homebuyers Investments will be able to draw on years of experience to ensure that this type of commercial venture delivers long-term results.