Advice for investors

Buy close to home or further afield?

Many first time investors buy close to where they live. And for good reason. Knowing the area and being able to keep an eye on your investment can make life much easier. However, if there’s not a big demand for rental properties near you, or you’ve spotted a great opportunity further afield, there’s nothing stopping you buying anywhere in the UK. It all depends on how hands on you want to be.

Do your homework

A little digging around is always time well spent. Find out what the rental market is like. What kind of rent landlords are getting? Is there something happening in the area that will mean they’ll be more, or less, tenants looking for properties? It’s all worth knowing before you invest. 

Do your sums

Today Buy-to-Let lenders will want the rent to cover 125% of the monthly mortgage payment. They all require at least a 25% deposit too. Don’t forget to factor in all your buying costs and day-to-day running costs too. 

It’s time to think yields 

Like any investment, you’ll want to know what’s in it for you. When it comes to Buy-to-Let properties, it’s all about the yield. In simple terms, your yield is your annual rental as a percentage of the property value. For example, a property that earns £6,000 a year (£500 a month) and costs £100,000 would give you a rental yield of 6%. 

Remember, how much deposit you pay, plus additional costs, such as your mortgage and buying costs will all affect your yield. 

How hands on do you want to be? 

Do you want to manage everything yourself or get an agent to handle everything for you? It all depends on how much time you have and how much you want to earn for your investment. 

Agents charge a management fee, but will find tenants, handle contracts and deal with any problems so you don’t have to. It’s worth shopping around to see what agents can offer and how much they charge. 

If you have the time find tenants, arrange viewings and keep up with the property maintenance, you could save yourself the management fee and be a hands-on landlord. This gives you a chance to really look after your tenants and build good personal relationship with them. And remember, happy tenants stay longer.

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