Buy-to let is a form of residential investment where you buy a property, usually with the aid of a mortgage, and rent it out. If you are thinking of purchasing a buy-to-let property you should seek expert advice on legal, tax, buy-to-let insurance, financial and property management matters. You need to be clear about the business ramifications.
The 1988 Housing Act made investment in residential property more attractive to landlords when it introduced a new type of tenancy giving landlords more control over their properties and this had led to a substantial recovery in the private rented sector since then. The availability of loans for buy-to let purchasers also increased the appeal of owning rental property. The market may have tightened, but property will always have appeal for investors.
When you a buy a property to let out, you are becoming a landlord. Owning an investment property is not like owning your own home: you are effectively running a small business and you have important legal responsibilities – not least of all, your tenants' safety. Before you choose a property and arrange the finance to purchase it, there are a number of factors which you should look into.
You can either undertake this research yourself or employ a specialist letting agent to provide advice on the best area and type of property to rent out. If you research the market yourself, try gathering information from estate agents, local papers, existing landlords and even the local authority regarding the demand for rented accommodation – and the type of property you should be considering. If, for example, you are buying in a university town, then think of the type of properties most suited to this market.
This leads to you thinking about the type of tenant you wish to attract. Are you hoping to attract single people, or families – their requirements will be very different. It is vital to remember that your property should have features that are attractive to would-be tenants, rather than would-be purchasers. Although difficult to do, view your property objectively and remember it has to appeal to others as well as you.
Check how close the property is to local amenities such as shops, transport and schools – are these the type of amenities which will attract the type of tenants you seek? So, if you are aiming to let your property to a family with school age children, how close the nearest schools are will be an important influence on them.
You will need to set guidelines – do you wish to include children and/or animals in your plans? Do you want professional couples, students, retired couples – your property will need to reflect the sector into which you are marketing the property and making firm decisions at the beginning will negate costly amendments later down the line.
Research is paramount, check your market within a geographic location, the type of tenants seeking accommodation and the surrounding area in terms of employment . You can then identify a target market and can then seek to purchase a suitable property. Once you have these basics in place, you can start to shop around for insurance, organise any remedial works which need to be done and then decorate and furnish your property (unless of course you choose not to furnish). Remember though, that the building will need insurance from the moment you take possession. It is vital that you don't delay. Talk to an expert in buy-to-let insurance and explain your plans for the property so that you do not have any nasty surprises in the future – buy-to-let insurance is not the same as you would have for your own home. Remember you are in business now, and you need to take a pragmatic and professional approach to everything to do with your new enterprise – and that means protecting your investment from day one.