Simple Guide for Buy to let Landlords.
Updated: Feb 1, 2019
Is buy to let dead? (Btl) Very much considered the gateway strategy to anyone wanting to get involved in property investments. People tend to have the idea that if they can buy a cheap property, Do it up and buy some furniture from IKEA they are good to go. Unfortunately, if it was this easy everybody would be doing it. In this blog, we will outline some important factors to consider when becoming a Btl Landlord.
The saying goes in property " Money is made when you buy " This whittles down to buying the property at the right price and the right time in the right location, Which we will touch on later in this blog. Firstly before anything else, you will need to be able to calculate the returns you are going to get from the property in the form of the Gross Yield, Net Yield, and ROI. To keep these simple let's go with a purchase price of £100k. If you were to rent this property out at £ 450 per calendar month the Gross yield would look like this, Monthly income x 12 % Purchase price ( £450 x 12 = £5400 % £100k = 5.4% ) Now to work out the Net yield you will need to factor in the costs of running the property and minus that from your Gross and do the same sum. So imagine it costs you £120 per month to run the property then the Net yield would be the following. £450 - £120 = £330 x 12 = £3960 % 100k =3.9%. So as you see from the example you would be making £330 per month from the property. These are the very basics of calculating the returns on your property but by no means should they be the deciding factor. When looking at the Gross yield of a potential Btl we would advise that you don't look at anything that gives you a gross yield of less than 8 %, 10% we would say is generally the sweet spot for a solid Btl.
There is no shortage of tenants looking for high-quality accommodation and as long as this stays true there will always be a market for Btl.
Tenants can also be the deciding factor in making your btl profitable or a monthly hinderance, rush this process and you could find they are costing you more money than you are making from your investment, Which is why it's vital you get "Good Tenants" and professional help from a local lettings agent.
Choosing the right property in the right location is arguably the most important aspect of the Btl strategy. This all comes down to research, research, research. One great way to efficiently carry out this research is to build relationships with your local letting agent in the chosen area. They will know which streets work and which ones to avoid. They will also know of any future developments or growth plans in the area before most people, which can be a good indicator as to whether the property will be rising in value or decreasing. There is also the option of spending some time on home which can give you rental statistics of your chosen postcode , such as average rents and time on the market. In our opinion choosing a property that is within a short drive to a local school and within a 10-minute walk to the closest Bus stop usually passes the screening process for potential tenants.
Once you have bought the property the chances are it will need some work doing to make it ready for the first set tenants. You will also want to make sure the property stand's out from the crowd with a beautiful finish. One common mistake investors could make is falling to the temptation of starting the works on the property themselves. This is always a bad idea and we will explain why. When hiring a professional they will always complete the works to a better standard than you ever could and much quicker as well. The key is getting the property back on the market asap as the longer you are waiting to put the property on the Market the more money you are loosing. When deciding to decorate and furnish your property it's important to remember not to get carried away and overspend. The key is switching your mindset to Landlord rather than the consumer. It is also advisable to choose good furniture that is long lasting and functional, This will save you hundreds of pounds down the line. One more possible overlooked aspect of refurbishing your property is the outside, First looks are everything and no matter how well the inside of the property looks, its pointless without a well-presented exterior.
In conclusion, Btl's will always be a solid Investment strategy in property and is definitely worth your time and money. There is more demand now than ever and with the new Section 24 tax changes, Supply is slowly dropping off. With that being said now is a great time to employ this strategy with rents rising and house prices slightly declining due to Brexit there is more opportunity than ever.
Feel free to look at our current buy to let investment opportunities within the North West, We are always happy to offer our support and knowledge to investors.