The housing market in the UK continued to show signs of recovery in June according to Peter Bolton King, Royal Institution of Chartered Surveyors (RICS):
“After what has seemed like a very long wait we are finally starting to see what looks like the beginning of a recovery in the housing market.”
Buying to let is an increasingly popular investment, given the current financial climate of low rates and how steady the stock market appears to be. Those who have enough to raise a deposit big enough may take buying to let as an option for future income, and a way of staying on the property ladder.
“UK’s housing market continued to show signs of recovery last month and reporting studies have shown that property prices will rise rather than fall over the coming three months. The housing market is a key indicator for the health of the economy and residential property investment is a safe bet.” Say experts from Yorkshire Building Society.
However, if you are considering investment in property on a buy to let basis, there’s a few things you will need to consider first.
Search the market, have a strategy and understand the risks
If you don’t understand the market, the risks, and the benefits of those risks, you’re not ready to look into this particular investment. Even if you have managed to save your money wisely you need to have an excellent idea of the kind of management needed and how long a mortgage may be.
It’s a good idea to get advice from those who have gone into the buy to let market before. You may well decide that your money could do better elsewhere.
Who will you rent to?
Decide early on if you expect to rent to students, young professionals or families. All have different requirements.
If you’re expecting to rent out to students, you’ll need to bear in mind that student finance is often where your rent would come from – and you’ll need to be able to trust tenants to pay on time.
Young professionals tend to want something modern and stylish, whereas you can expect families to want to be able to customise the house with their own décor and furniture. Making tenants feel more at home means they’re more likely to stay as the years go by.
Where to buy?
The location of a house affects the price greatly – but you should also remember it’s harder to get tenants if the house is in a poor location. Look at the transport options, whether there are schools nearby, if it’s close to a university etc…
What’s your income going to be?
Lenders of buy-to-let mortgages tend to want the proposed rent to cover 125% of the mortgage repayments, and some demand large deposits – sometimes as much as 25%. Rates will be higher than usual mortgage deals.
You’ll need to do your accounts, and bear in mind that you aren’t guaranteed tenants. Can you manage if the property goes two months without a tenant?
Know the downsides
As with any investment, you’ll need to know about every negative aspect of buying to let. One is the risk. Given that house prices are falling, will you be able to keep your investment? Also, what if you are unable to get a re-mortgage?
Homes need repairs – you’ll need to bear in mind that there will be maintenance costs throughout the year.
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