It’s clear that building a property portfolio is an established route to financial independence, but the big question is how can you do this both safely and effectively? It isn’t just about managing the properties themselves, the most successful are able to think outside the box and be prepared for all eventualities.
Here are some key points to keep in mind when it comes to making long-lasting income from buy-to-let properties.
1. Get advice from specialists
Most importantly, it’s vital to listen to and learn from people who know the industry inside out. This means approaching people established in their field who can warn against risky strategies and point towards reliable methods that will bring in income, no matter what happens to the market. No costs involved. Talk to local managing agents in the area you are investing in, they will be able to give you advice free of charge.
2. Start with solid foundations
Your first property is arguably the most important. This is the stage where you learn the intricacies of how a buy-to-let business works, so be sensible and make sure to minimise any mistakes. Always be willing to identify where you could do better next time to fine-tune your strategy for your future properties. With each property purchase you will be able to identify where you could do better next time to fine-tune your strategy for your future properties.
3. Be patient and don’t overpay
It’s important to calculate potential yields and costs before making an offer. This is basic business sense but is often overlooked by over-eager and less experienced property investors. Rather than rushing in and buying quickly, look for good deals at a local level and don’t be afraid to make offers to gauge the market. This can take time to work out but patience is a valuable skill to learn when it comes to purchases of this size.
4. Timing is key but other factors matter too
Investing is defined by peaks and troughs, and while there’s no failsafe way to know the perfect time to buy, there will always be indicators to look out for. Take time to explore previous trends as well as looking at what is happening at a local level. For example, are there big developments announced for the area? This can mean an increase in people moving to the area and a subsequent increase in demand for housing. Combine timing with insight and you’ll improve your chances of establishing a healthy portfolio.
5. Understand the market
We’ve seen some of the highest growth in terms of rental yield in the North West with rental prices increasing 4.9% year on year (Rightmove). Although signs indicate a slow decline month-in month, house prices continue to grow year on year +3.3% (hometrack), compared with an average +1.1% in the UK.
London has an average rental yield of 2.76%, compared with 4.37% in the North West. Combined with recent huge investments in the area, this makes Manchester the ideal location for Buy-to-Let Landlords and investors to grow their portfolio. (Zoopla).
The outer suburbs show the strongest performance with M11 seeing 7.5% and M14 receiving 7.6%. The city centre has healthy rental yields, with M1 gaining 5.1%.
6. Get Compliant
Becoming a landlord or converting a house into a HMO (Houses in Multiple Occupation) means that your property becomes subject to further legislation and that you need to meet certain standards and obligations.
Make sure you know and understand the changes to the industry, the number of new laws has increased 32% since 2010 (RLA), failure to comply could result in large fines, money that could go towards your next portfolio investment.
Recent changes to tax, Minimum Energy Efficiency Standards and Electrical Regulations are to name a few. It’s important to stay up to date so that your money is invested where it matters. homes4u can provide you with the relevant and correct information you need to stay 100% compliant.
7. Think about the future
Building a successful portfolio of buy-to-let properties means having a short-term, mid-term and long-term plan. This ensures you have a fixed goal while being able to adjust to any changes in the property market. For an increased chance of success, you should have plans for the next 12 months, the next five years and the next ten years, with financial plans that cover buying, selling and borrowing.
Speak to an independent financial advisor to understand how to maximise your capital investment. You may be able to afford a property outright but a mortgage advisor will be able to explain the benefits you capitalise on by applying for a BTL mortgage.
Speak to us to learn more about independent financial advice.
Get in Touch
Simply by reading this article, you’re showing a willingness to seek advice and there’s no better team in the North of England than the housing specialists at homes4u. With over three decades of experience, we’ve seen the housing market develop and change in all kinds of ways, and learned how best to deal with properties at all stages.
Our proven methods have helped existing landlords with their current portfolio, giving them time and money to focus on acquiring new sources of income.
If you want to utilise the expertise of the homes4u team, simply get in touch and we’ll be happy to help.