Playing the buy-to-let game is a serious business and you should plan ahead thoroughly before diving in at the deep end. It's essential that you consult the professionals in the fields of legal, financial, tax and property management matters for advice and guidance before you start your journey. You can then start planning with your eyes wide open and hopefully prevent any unforeseen problems arising further down the line.
How will you finance the purchase?
This is one of the biggest questions to consider at this stage, particularly given the size of the purchase and the nature of the investment. You should consider not only the upfront cost of the property itself, but also the fees involved in the purchase, developing costs and the on-going maintenance of the property in the long-term.
The most common way of buying a property to let is to arrange a dedicated buy-to-let mortgage. There are plenty of mortgages available from buy-to-let lenders, all designed to ride the waves of short-to-mid term changes in rental sector demand. Remember, buy-to-let mortgages tend to be more expensive than traditional mortgages, with the majority of lenders demanding a much bigger deposit than with a standard mortgage. This is normally a minimum of 15% of the property value (although many can ask for up to 30%).
Additional costs of buy-to-let property
But it's not just the cost of the deposit and the mortgage repayments that you need to think about. There are numerous other costs to factor into your calculations, such as:
* Stamp duty
* Legal fees
* Income tax (on the rental profits you make)
* Capital gains tax (if you sell the property)
* Mortgage repayments (if the property is ever empty)
* Landlord insurance
* Maintenance and repair costs
* Furnishing expenses (if the property is to be furnished)
* Letting and managing agent fees.
Budget carefully and be satisfied that you can cover all of these expenses comfortably before you begin your buy-to-let journey for real.
Research your market
It may sound obvious, but it's essential you do your homework and thoroughly research the market, from potential locations, to your target market, to the kind of properties you think might offer you the best return for your money. Visit the local estate agents to discuss the rental hotspots in the area, where the demand is coming from and the kind of properties that are easily let out to tenants. You can search for an estate agent right now on Primelocation.com. You can also employ a property search agent to find a property on your behalf to help you maximise the chances of success.
Search for different types of property to rent in particular areas on Primelocation.com and see what the market rates are and how they compare with other properties in other locations. This should help you understand the potential return on the kind of investment you plan to make and where best to search for a property to buy.