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Buying To Let Tips



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By : Richard Ray    99 or more times read
If you are a long term investor in the Buy-to-Let market, then you are on line to reap the benefits. There are never any guarantees with any investment and it is the same for the Buy-to-Let investor.

Tip 1 - Know your market

The only sensible thing is to understand all of the benefits and pitfalls of the Buy-to-Let market. You must do your RESEARCH. Make sure that Buy-to-Let is for you. Could your money earn more elsewhere? What d you know of this particular market? Ask someone who has experience in this field. Talk to them about there experiences. Do you know others who have opted for Buy-to-Let investment property?

Tip 2 - Location is the key

Make sure you choose a promising area where people want to live. What are the facilities like locally? Consider shops, schools and transport. Is there a local University? Students will always need accommodation in these areas.

Tip 3 - Make sure that the sums add up

Begin by sitting down and writing down the cost of houses that you are considering looking at and the likely rent you are likely to get. Do your research on what rents are being paid locally. Do this before you even think about looking around properties. Traditionally buy-to-let lenders want rent to cover 125% of the mortgage repayments, although this is now changing and some lenders are relaxing this. Most mortgage lenders also look for around a 15% deposit in order to protect them from falling prices. This is changing and 95% and even 100% mortgages are becoming available. Consider what will happen if the property sits empty for a month or two? Will you be able to meet the mortgage payments?

Tip 4 - Don’t take the first mortgage on offer - shop around

There are several mortgage companies that offer Buy-to-Let mortgages these days. Don’t just walk into your bank and building society and ask for a mortgage. Consider using a specialist buy-to-let mortgage broker. Asking them for information does not mean that you are under obligation to use them.

Tip 5 - Target your tenant

Who are they and what do they want? Try to put yourself in the shoes of your target tenant instead of imagining whether you would like to live in your investment property. Keep your business head on - do not let your emotional likes and dislikes rule! If your target tenants are students, the property needs to be easy to clean and comfortable but not luxurious. If you are looking for young professionals the property should be modern and stylish but not overbearing. If it is a family they will have their own belongings and will need an empty canvas to work

Tip 6 - Don’t over stretch yourself

Although the market is currently on the up at the moment, the days of double digit house price rises are gone. Most experts advise you to invest for income - not short-term capital growth. Once mortgage, maintenance costs and tax are taken into account, you will need the rent to build up over time and then you may be able to use it as a deposit for further investments.

Tip 7 - Consider widening your geographical horizons

Try looking further a-field to find your property. Most buy-to-let investors look for properties near to where they live. However, your town may not be the best investment area. The advantage of a property close by is being able to keep an eye on it and maintain it, but if you will be employing an agent anyway they should do that for you. Look at towns with good commuting links, that are popular with families or have a sizeable university or college with a large student population.

Tip 8 - Negotiate!

As a buy-to-let investor you probably do not have a property that you need to sell before buying. If you are not reliant on selling a property to buy another, then you are not part of a chain and represent less of a risk of a sale falling through. This gives you the same advantage as a first-time buyer when it comes to negotiating a discount. This can give you a sizable advantage when negotiating a discount on the purchase price of the property.

Tip 9 - Be aware of the pitfalls

You should always investigate the negative aspects of buy-to-let as well as the positive before you make any investment. Although there has been some recent movement upwards in some areas, the general consensus is that house prices are relatively stable, but they still may drop slightly or even considerably. Will you be able to continue your investment if that is the case? Even in popular areas properties can sit empty for some time. Many buy-to-let investors factor in the property sitting empty for two months of the year – which gives a substantial buffer. Homes often need maintenance and things can go wrong. If you do not have enough set aside to cover a major repairs to your property, it would be wise not to invest yet.

Tip 10 - Consider if you want to employ an agent

Buying the property is only the first step of buy-to-let investment. Do you intend to rent it out yourself or will you get an agent to do this for you? Agents charge you a management fee, but will also deal with any problems that might arise. They will have a good network of plumbers, electricians and other tradesmen if things go wrong. You can make more money by ‘doing it yourself’ but you must be prepared to give up your weekends and evenings on viewings, advertising and repairs. Many independent agents offer an excellent and personal service and you do not have to go for a High Street presence. Make a shortlist of agents big and small and ask them what they can offer you.
Richard Ray writes for the Householders Guide where you can find up to date real estate news and household information.

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