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Part 2: Investment Tips For Buy To Let Investors
Last week we shared our first five top tips on how to invest in property. The buy to let market is a great opportunity but as with every investment it pays to do your research first! Only lottery winners become millionaires overnight through luck alone so remember to do your homework before diving in. In the second part of our top tips blog here we show you how to put that research into practise.
Know your target tenant
Property can be very personal but it’s important as a BTL buyer to understand what potential tenants, not you, are looking for in a property. You will be offering a home so think about the needs of the tenant. Young families need storage and might want a garden, whereas students are more likely to want somewhere with the basics that’s easy to maintain. Understanding your target tenant will increase the likelihood of long term tenants.
Focus on rental yield
Don’t get carried away with an image of yourself and your buy-to-let millions yet. Before you part with your cash take some time to understand and compare yields so you can weigh up your options. Property prices can fluctuate so it is sensible to invest primarily for income rather than in expectation of capital growth. Comparing yields on potential properties will help you to understand what your income will be. Work out your yield by dividing your annual rental return by your investment then multiplying that by 100. (e.g. (£750 x 12) = £9000/ £175, 000 = 0.0514… x 100 = 5.14% yield) While it’s useful to understand how this works it’s much simpler to use a yield calculator.
Prepare for the worst
Plan for the worst, this includes planning for major repairs and having a contingency fund. Can you afford for your property not be occupied for two months? This is the time to plan for that. Ensuring that you have money tucked away to deal with worst case scenarios will help you should anything go wrong.
This is where all of your research will start to pay off. As a BTL buyer you are in a strong position to negotiate. You should know the market well after all of your research, and know what a good price is. This is the time to stick to your guns, and get a good price.
Figure out your role!
Investing in a property doesn’t mean you have to personally unblock your tenants loo, unless you want to. An agency like Cairn who specialise in property management can offer you peace of mind, however this isn’t for everyone. If you do choose to manage your property yourself it’s important to consider where you’ll source contracts like tenancy agreements from, to devise a strategy for keeping up to date on landlord legislation as well as how to advertise your property and find time to conduct viewings and keep up with repairs.
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