5 Things First Time Buy-To-Let Investors Must Know!
It’s tough being a first time buy-to-let investor. I had no background in property when I started out, so all of my knowledge in the business was acquired through trial and error.
To save first time investors from some of the hardships I went through, I’m sharing all the things I wish I knew during my first venture into this type of investment in this newest post.
It’s time to hit the books
Before you start investing your hard-earned money, you have to educate yourself first on the different aspects of buy-to-let properties. There are different kinds of buy-to-let properties and among the most popular are purpose built, student, renovation, and overseas.
You’ll also have to decide what your financial goals are in making this investment. Are you investing for rental income, capital growth, or both? Think about the answer right away, because these typically dictate which type of buy-to-let will suit your goals and needs.
Finding the right location
Property investment is all about location. Experienced investors even say that the address of your investment alone will dictate if you will fail or succeed.
Due to this well accepted connotation, most first time investors choose a property very close to the area where they live because of familiarity with the location. In my opinion, however, it’s more effective to select properties in areas where there are many people, so there’s a higher chance for your buy-to-let to attract tenants. In fact, buy-to-let properties in Manchester and Liverpool- 2 areas popular with working professionals- always report high rental yields.
Change your mindset now that you are buying an investment property. Buying a house you want to live in and selecting a lucrative buy-to-let property are two very different concepts.
A buy-to-let close to schools, offices, shops, and restaurants will always be in high demand, while those very near transportation hubs can yield higher rental rates compared to investment properties in remote locations.
These qualities may not be what you are looking for in your dream residence, but these are what many tenants look for in a rental property nowadays.
Just because you’ll now have a property that will earn you passive income every month doesn’t mean that you can spend all the money that comes into your hands. The truth is that it’s costly to maintain buy-to-let properties. That’s why it’s important to set a budget on how much you’ll spend or borrow for your investment and how much you can spare for additional costs such as tax implications and other outgoings like bills and repairs.
Do you want to be actively managing or passively managing?
It’s also crucial to figure this out early on if you are going to manage the property on your own or through a letting agent. Those who want to remain hands on with the management will be required to find tenants, conduct viewings, and care for the property in all aspects.
This will save you money, but it will eat up most of your time. Hiring letting agents, on the other hand, can give you more time to grow your property portfolio but this means you’ll have to spend more money for the management of your buy-to-let. So assess your current situation carefully and decide which approach will be better for you.
I hope you can apply all of these tips as you begin a career in property investment.