4 Steps to Buy To Let Bliss
Sadly stories of buy to let investment gone wrong are all too prevalent. Bad tenants, huge maintenance bills, squatters, all can turn a property from a money tree into a money drain. But that needn’t be the case. If you follow these steps you can limit your risk and watch the returns roll in.
1. Mind the Gap
If your property has been sitting empty for more than a month whilst you look for tenants then you’ve done something wrong. If your property is empty for a month then you’ve lost a months revenue- a lot of money. How can it be avoided? Simply. Put the property up for rental at least six weeks before your old tenants move out, ideally eight weeks. Secondly, make sure your price is right. If you’re not getting a lot of interest in the first two weeks of it being on the market, move fast and reduce the price. It’s better to have the property on at a low price than a high price- if the price is to low, you’ll find prospective tenants will big against each other and force the price up. But if it’s too high then people wont even walk through the door, and you might be left waiting whilst your house loses money. It’s better to rent it for £10 a week less than you want than to lose a whole months rent.
2. Do your homework
Before you buy a property make sure that you’ve had a thorough survey done so as to avoid any nasty surprises. This is especially true for older houses, where a defective roof can see you facing a huge bill, and for flats in older buildings, where your lease may well make you liable for repairs even if they don’t directly affect your flat. Older buildings are more likely to have unexpected expenses, so bare this in mind. If it seems like a property might be too risky, then avoid it, or make sure that you have excellent buildings insurance. Forewarned is forearmed.
3. Budget maintenance
It’s tempting to stick your fingers in your ears and hope that the property will keep on going without needing any work done for years to come. But that would be foolhardy. Assume that you’ll need a new boiler every five years, and a new kitchen and bathroom every ten years. You might end up being lucky- your boiler might run for twenty years with no problems. But if you set money aside for these eventualities then there’s no way you’ll be stuck when it comes to paying for work which needs to be done.
4. Reference Reference Reference
A good tenant makes your life bliss. Likewise, a bad tenant can make it hell. As a basic standard, make sure you have your tenants thoroughly referenced to check their credit history, their employment status and their criminal record. Make sure their salary realistically covers their rent and living expenses, and if there are credit or criminal record problems, steer well clear. If you’re renting to students make sure that they have guarantors and that the guarantors are referenced in the same way as tenants.