With more Britons becoming property investors, how easy is it to become a property investor?
Even though Buy-To-Let mortgage rates are at a low, the stamp duty crackdown has made investing in property tough. Even though the housing market was pretty stalled in 2019, this hasn’t stopped Britons from considering purchasing a B-T-L.
Why should I consider owning a Buy-To-Let?
Firstly, mortgage rates on buy-to-lets are low. However, as previously mentioned, stamp duty tax is high. When people have bought an extra property, they have had to pay an extra 3% on stamp duty. However, even though this change is negative, there are positives to purchasing a B-T-L. Currently, there is a greater demand from tenants. And with rents set to rise with inflation, a long horizon with interest rate rises, it has overall kept people interested in investing in buy-to-lets.
How can I get started?
To help you find the right property investment for you. We have put together our top tips to investing in the market successfully:
- Research is key
- Investing in the right area
- Calculators at the ready
- The ideal tenant
- Getting the best Buy-To-Let mortgage
- Understanding the pitfalls of Buy-To-Lets
1. Research is Key
We cannot stress how crucial this point is. Everything balances on this point. Even though there are many benefits to investing in property, the cons need to be compared.
If you are new to the buy-to-let market then reading around the subject is a good start. Not all buy-to-lets are successful and if you decide to sell, you may lose money on the property.
Plus you may find that there are other more beneficial ways for you to invest your money.
2. Investing in the right area
Within your research will be looking at investing in the right area. This doesn’t mean buying a property in an expensive area, it means selecting a property that people would want to rent for a wide variety of reasons.
When looking at where to buy, consider:
- What is appealing in the chosen town?
- Its it commutable? Example, Hemel Hempstead is great for those wanting to be outside of London but commute everyday
- Does the area have good transport links?
- Are there good amenities in the area? Example, shops, parks, sporting clubs etc.
- What are the schools like in the area? Many will move to an area where the schools are good
- Would students want to move in your property? Some areas with Universities attract student rentals which could be an opportunity for your property investment.
It is pivotal to consider all these aspects and match this to what you are able to afford.
3. Calculators at the Ready
Before jumping in with both feet, a significant factor to consider is the finances behind your investment. Any investor needs to look at all the costs likely to come from their rental.
All costs need to be factored including:
- The interest on your mortgage
- How much yield you wish to receive
To understand how to work out the yield on your property, then check out our blog on rental yield.
4. The Ideal Tenant
Rather than thinking if you would personally want to live at the property, put yourself in the tenants shoes. Depending on the tenant you want to attract would depend on the type of property you want to put on the market.
There would be no point trying to attract students to a property miles away from any universities and that has luxury furnishings. Staying with the example of students, you would want to purchase a property that is basic, clean and has a few bedrooms so a few students can rent together.
5. Getting the best Buy-To-Let mortgage
Going to the first bank or building society on the high street is not the answer. Like most things you will encounter on your way to buying a property, research needs to be done.
Doing your own research online and speaking to a good independent broker is a great starting point. It pays to speak to a broker as they can also weigh up which mortgage is better for you with the best rate.
6. Understanding the pitfalls of Buy-To-Lets
Unfortunately, not all buy-to-lets are successful. House prices are currently slowly growing, but this may not be forever.
This is the same with other factors. What happens when interest rates go up? What if you can’t remortgage? These questions need to be addressed before purchasing a property.
For those wanting to purchase a BTL, it is key to understand that the gains from the property are long term. If you are wanting short term benefits, the best way it to buy a property needing a repair and then sell it on.
I started writing for PPO back in August 2019. I particularly enjoy writing about new housing developments and upcoming property events.