BTL Tips

Renting property is not exactly a walk in the park

Whether you are considering buying your first buy to let property or considering keeping your existing house and transferring it to buy to let, there are few points to consider:

Finding a right property is crucial, as not every property has a rental potential. Before you make a decision to buy, you need to know who your tenants are. Are you ready to rent your property to students or you are expecting to find professionals or may be a family with children?

From here we can understand that size, location and condition of the property are equally important and differ for each category of the above categories.

Location, location, location…yeas we all heard that before, but the answer will vary for each type of tenants. Students prefer to be near the campus and night life, families near good schools and so on.

Each of them will have certain expectations. Students tent to look for furnished accommodation, while families have their own furniture. Professionals expect that property will be in a good state of repair and decorated up to standard.
Okay, you have decided who your tenants are and ready to start.

We now need to establish where to find them.
Again, there are two options available:
-Estate Agents
-DIY

The first case scenario is probably the most advisable for inexperienced landlords, but you have to remember that their services will cost you in the region of 10-15% of your rental income. Help of the experienced letting agent, can be invaluable to newcomers as they often don’t know where to start and what to expect. However it is important to take into account these costs in your profit and loss calculations.

DIY option is not for a light hearted and if you have decided to do everything yourself, you must be prepared to deal with problem tenants, inspect and maintain the property in a good state of repair and to collect the rent. In case of a letting agent, you are relying on their Letting Agreement , in DIY case scenario you must be sure that your Letting Agreement is up to scratch and will not let you down in the problem situation. If you require a buy to let mortgage, many lenders will require that property is let out on a professionally compiled Shorthold Tenancy Agreement. Also you will be expected to comply with certain rules and regulations related to buy-to-let. You must apply for a licence if you are renting out to multiple tenants, furniture must comply with the fire regulations and new energy performance certificates are required by many lenders.

Another important and often the most crucial factor in buy-to-let decision making process is finance. If you are lucky enough to inherit your property, then it doesn’t apply to you. The right buy to let mortgage deal could make the difference between making a profit or loss. Not only have to consider that deal is viable at the current rate, you must account for rates fluctuations and be prepared to finance shortfalls. Also you need to expect that there will be periods of void, when property will be unoccupied, but you still will be liable for your buy to let mortgages payments.

All of the above has no intention of scaring you away from buy-to-let, hopefully by reading this your will be better prepared and will avoid painful mistakes.