Is buying investment property still worthwhile? Our 7 top tips for success
There have been several changes to regulations affecting the Buy to Let market over the past year. Both potential investors and seasoned landlords would not be blamed for asking, ‘Is buying an investment property still worthwhile?’
Well, we like to think that with the right knowledge and advice, it is. Despite the ever growing list of rules and regulations in the sector, both demand, and in turn rents, have continued to rise.
Manchester has seen the highest average house price increases in the country in the twelve months to March 2017. Recently Hometrack reported a house price growth of 8.8%.
Buying an investment property can still be a worth while venture, however it is important to plan and get advice from investment specialists from the outset.
1. Know your market
Firstly, decide what kind of tenants you wish to target as this will determine the area and property type you should look for. For example family tenants may see renting as more of a long term commitment. Long term tenants can be beneficial for many reasons. You have the opportunity to build a better relationship with your tenants for starters.
A long term tenant can also provide a landlord with peace of mind and security. Knowing that your property is occupied for the foreseeable future reduces the chance of any costly void periods. A long term tenant will also feel like they have more of a personal stake in the home. If a tenant is confident they are going to live in a property for the long term they could be more willing to invest in the property by redecorating or buying furniture and there is a mutual interest in the upkeep of the property.
There are however other target markets to consider such as the student market and HMOs. Student tenants tend to move more regularly and with the option to rent reception rooms as bedrooms you may be able to achieve a higher rent. Make sure you do your research thoroughly.
2. Location is the key
We have all heard the phrase location, location, location and it is very true. Buying an investment property close to hospitals, universities or a large private company is a wise choice. Being within walking distance of shops and transport links is also going to make your property more attractive to the most potential tenants.
3. Know your figures
As a part of tax changes in April 2016, mortgage interest tax relief is now restricted and wear and tear repair costs are harder to offset against tax. It was also announced last year that an additional 3% stamp duty surcharge is incurred when purchasing a buy to let investment.
On a monthly basis, you will need to make sure the rent offsets your costs in order to make it a profitable venture. These costs include:
• Mortgage repayment
• Average monthly maintenance allowance
• Letting agents costs
• Allocation for voids
• Insurance costs
• Management charge and service charge (leasehold properties)
4. Consult a mortgage advisor
Even if you can afford to buy outright, it is worth considering getting a mortgage as by doing so you will still receive at least some tax relief.
Lenders will want evidence that the rental income is between 125 and 135 per cent of the mortgage repayments. This is in order to make sure they will receive money in void periods in between lets.
At homes4u we are always looking for ways to add value to our customer service. At the beginning of 2017 we formed a partnership with Mortgage Advice Bureau through which, we can now offer market leading financial advice.
Mortgage Advice Bureau can provide:
• Access to over 11,000 mortgage deals from more than 90 lenders.
• Flexible appointment times including evenings and weekends.
• Free movers protection for customers.
• Excellent administration support for quick mortgage offers.
• Hassle free, professional, friendly advice.
• Experienced advisers capable of handling complex circumstances.
• Appointments in branch, at your home or place of work.
• A customer satisfaction rating of 93% from over 2,000 responses. 93% of our customers said they would recommend us to their friends and family.
If you would like to discuss buy to let lending opportunities, contact us and we will ask our financial advisor from our partner firm to get in touch.
5. Industry rules and regulations
It has been mentioned before, the rules and regulations governing the buy to let sector are ever changing. Some of the most recent changes including smoke and carbon monoxide detectors, right to rent, retaliatory evictions and prescribed information to be given to tenants.
At homes4u we are committed to making sure our clients stay up to date with regulations and have held seminars for both our managed and let only landlords. As part of our managed service, landlords have the advantage of our ‘in house’ compliance team, part of our property management department.
6. Fit out your rental property
Whether you furnish your investment property really depends on the tenant type you are targeting and the area you are buying. For example, a group of students will want a fully furnished property with desks in each room. A family could have their own furniture they wish to bring into the home.
If you are looking to give your home a show home feel but not break the bank there are specialists who can help. If you have a property or properties on the market, or tenanted out, do not hesitate to give LOFT Interiors a call for all your professional furnishing needs.
7. Appoint an agent
At homes4u we offer a fully-managed ‘Gold’ service which means we look after everything from finding the tenant to moving them out and all that goes in between. We also offer a ‘Silver’ let-only option for landlords who would like to manage the tenancy themselves. For larger portfolios and corporate clients we can cater specific packages, please get in touch to discuss your requirements.
It is tempting to do it yourself, but managing a buy-to-let property investment by yourself is becoming increasingly complex with new housing laws and health and safety regulation changes coming into place on a regular basis.
If you are considering buying an investment property, are looking to sell your buy to let investment, or have a property to let, contact our branches and talk to one of our investment specialists. http://www.homes4u.co.uk/contact-us
Would it help you to know how much your home is worth? Whether you are considering selling, or just out of interest one of our valuation specialists can visit your home without obligation to provide you with an up to date valuation for sale or for rentals. It’s easy to arrange, simply complete our online form http://www.homes4u.co.uk/valuation and one of our team will call you back.
If you are looking for a property to let or buy, please visit our property search pages http://www.homes4u.co.uk/property-search where you can view all our current availability. If you would like to be kept up to date with new instructions and price changes simply register in our members’ area http://www.homes4u.co.uk/log-in or contact our friendly team in branch. http://www.homes4u.co.uk/contact-us