If you are purchasing a buy-to-let, here is an article that will help
Buying a buy to let property can be a lucrative, long-term investment. A property that provides a steady stream of rental income and long-term capital growth is what everyone is looking for. But what should you be looking out for?
We’ll start with the obvious – finding the best homes.
Utilising online portals like Rightmove, and Zoopla are a great place to start and will usually have a comprehensive list of homes available for sale. Simple things like setting up alerts to receive notifications on properties that match your criteria is a good place to start. BUT you’ll likely be one of many to receive this notification. So, is there a way you can beat others to it? YES.
Using technology, we’re able to search for ‘off-market homes. You could give us a list of your criteria in any specific road within the UK, for example, it needs to be a 3 bedroom, detached house with more than 1000 sq/ft of space, with a C grade EPC within your budget. We can be much more specific than this too. We’re then able to tell you what homes meet those requirements and because we have their addresses, we then reach out to the homeowner to see if they would be open to letting you do a viewing.
The best homes are always the quickest to sell, and this is an effective way of trying to beat the rat race with online portals.
Not all agents offer this, but regardless we would recommend going in and meeting with them. Establish relations, give them your criteria, and no doubt they’ll be able to provide you valuable insights and notify you about homes as soon as they find out about them. We would usually say as a minimum, we are about a week ahead of Rightmove/Zoopla – in many cases, we are aware of a home that’ll be coming to market months before it does.
It needs to stack up
Before all of this, it’s very cliché, but get your finances in place. We speak frequently with buy to let investors, and when we ask what rental income they need to achieve, the vast majority aren’t aware. We’re not doing this to catch them out, but simply to make sure it’s realistic and they are being informed about the right houses.
Having a 25% deposit doesn’t automatically qualify someone to purchase a buy-to-let. We couldn’t tell you the last time a buy-to-let investor was able to purchase with this level of deposit. Usually at this level, the mortgage would be higher than the rent they’ll achieve, which means they usually have put down a higher deposit amount. Keeping it simple, the lender will have a notional rate (stress rate) that provides a guide on what the mortgage payments may be, and the rent payments must be a % above this (125% or 145%) of the mortgage payments.
So, before doing anything, speak with your advisor, find out what you can borrow, and what rental income is needed to get the figures to stack up. Lastly, if you are buying a property that needs repair, be mindful that a mortgage surveyor will value the property in its current condition and what rent it’ll achieve now, not usually what it’ll be worth once you’ve made improvements. So, for a home in need of more TLC, you’ll often need to put down a more substantial deposit for this reason too.
Start with the end in mind
Who is your ideal tenant? Then what attributes would the property have to attract that person? A single person is likely to lean towards things like proximity to transport and the local amenities. Whereas a young family could be likely to base their decision on proximity to schools, parking, and space. Or maybe you want to do a HMO, so the total amount of rooms within easy reach of universities and hospitals is going to be important. There is no right or wrong answer, all yield different benefits that could be a great investment for your portfolio.
If you’d like to speak about our ‘off market’ search service or would like some letting advice on maximising your investments, we’d be happy to help.
