14^th March 2022

Ten ways to ensure you make the best buy to let purchase

To the uninitiated, the process of purchasing a buy to let property may seem the same as buying a property to live in, but that isn’t actually the case. The key factors to consider are how much you want to spend, the ideal location for the investment and the type of property that will best suit you in terms of occupancy and yield. In addition, a buy to let purchase still requires conveyancing, but the charges and expectations can be different. Here are our top ten tips when it comes to securing the best deal for your buy to let investment.

1 Understand the buy to let market
Buy to let isn’t without its pitfalls, so go in with your eyes open. As a landlord you’ll have legal obligations in relation to the property itself and to your tenants, so make sure you understand these before you take the plunge. It’ll be your responsibility to keep the property in good condition and to carry out regular safety checks, for example.

2 Ensure you can afford the property
The likelihood is that you’ll need a mortgage to fund the purchase, and a buy to let mortgage is different to one you may have arranged to buy your home. Especially if you’re new to buy to let, it’s worth taking professional financial advice, in particular around your personal tax situation. And it’s important to remember that the expenditure doesn’t end with the purchase as it’s likely that you’ll need to continue to carry out maintenance and repairs on the property. In addition, you need to consider the financial implications if your property remains empty for a period and/or if your tenant fails to pay the rent on time.

3 Set your preferred ‘yield’
For the most part, buy to let is a longer-term investment, but irrespective of the amount of time you think you’ll hold on to the property it must give you a yield. For example, if you were to buy the property for £200,000 and the annual rent you charge is £10,000 then your yield would be 5%. Your yield can be affected by a number of outgoings, some of which can get overlooked. These include the cost of advertising the property, the cost of managing the property on your behalf and also expenses such as Stamp Duty.

4 Do your research
Due diligence is a big aspect of successfully buying to let. Prior to signing on the dotted line, it’s important to find out whether there are – or have been – any issues with the property in the past, exactly who owns it and precisely what will be included in the sale. These may be transferable to you even if the property is already occupied. And if the property is already rented out, also find out what type of tenancy agreement is in place and how long it has to run.

5 Identify your location
It’s tempting to buy to let locally for convenience, but your preferred location may not be the one that gives the best yield for you, so choose wisely, and engage a letting agent to manage the property if it’s not local to you. One of the biggest mistakes that buy to let investors make – especially when entering the market for the first time – is to look to buy a property they’d be happy to live in and in a location they like.

6 Decide which type of tenant to target
This isn’t an exact science, but the needs of a professional couple or a young family are going to be very different from those of a group of students, as are their expectations. As well as the type of property, the furnishing and the fixtures and fittings should be tailored to the type of tenant who will want to rent from you. This may also influence the location where you buy, the ceiling rent you can command and the average lifespan of a tenancy agreement.

7 Avoid paying over the odds
Ultimately, buy to let is about making money, so make sure you negotiate on the price and resist being drawn into overpaying for the property. Arrange a survey both for peace of mind and to ensure that there won’t be any nasty – and expensive – surprises when you take ownership. It’s important to stand your ground and to avoid being talked up where the price is concerned – after all, it’s always possible to walk away and find an alternative property.

8 Borrow well
In some cases, the interest rate and the charges on buy to let mortgages can be higher than on their residential equivalents, so shop around and – ideally – take professional advice. The key is to resist the temptation to take out a regular mortgage without disclosing the intended purpose for the property. In effect that constitutes mortgage fraud.

9 Take out insurance
For buy to let properties you need to have specific buildings and contents insurance to ensure you’re covered as a landlord, and you also have the option of protecting yourself against a lack of occupancy too. Don’t be tempted to go with the cheapest insurance available as it may not protect you against all eventualities – saving money is wonderful but finding out that you’re uninsured can be a financial disaster.

10 Put it all in writing
As with insurances, it can be tempting to cut corners, but ensuring that your paperwork is all ratified by a solicitor can be worth its weight in gold. Whether it’s laying out your responsibilities and those of your tenant(s) or specifying what happens if the rent is unpaid, a thorough tenancy agreement is essential. Not only that, it will also help in any adjudication should a dispute arise.

Andrew Ward, owner of Award Property Management, believes that buy to let is a great investment option, but it’s not one to be taken lightly. ‘As letting agents in Cambridge, we see a lot of entrants into the buy to let market,’ comments Andrew. ‘Sadly, however, we also hear of many horror stories where aspiring landlords have jumped in without doing their research and have had their fingers burnt by things that could easily have been avoided with the right advice. We have extensive experience of the buy to let market and have worked with several landlords to help them achieve a great return, so we’d encourage anyone considering moving into buy to let to give us a call.’

Award Property Management are letting agents in Cambridge. If you’re considering buy to let or would like advice on any other aspect of the rental market, please get in touch. We’d be happy to help and advise.