If you’re lucky enough to have money to invest, you could make far worse decisions than putting it into property. Prices may fluctuate a little over the years, but there is, as a rule, always demand for somewhere people can live, especially if you’re able to opt for a property in a city like London or Edinburgh.
If you’re going to take this option, you need to prepare and do some research. It’s a much more hands on process than you might find with other investments, and you might need to know how to renovate a house, how to credit check a tenant, and be on call for emergencies at the house 24 hours a day!
Today we’re presenting a beginner’s guide to how buy a property to let, to make sure you’re getting off on the right foot.
Where to Buy
If you’re buying to let, it’s important to get a good deal on the property you’re buying. Don’t forget, you won’t see any profit until you’ve paid off the capital you’ve sunk into the house or flat, so the lower the price tag the sooner the rent stops paying back that sunk cost and starts going into your savings or current account.
Buying at auction could get you a real deal but you need to be sure you’re not taking on more than you can handle. Many houses end up sold at auction because they’re in a less market ready state than ones sold through a standard estate agent, often because the owner is deceased, out of the country or otherwise unavailable to tend for the property. You may need to adjust your budget for the additional cost of bringing the property to a liveable state for tenants.
Standards
If you are converting a property for the rental market you need to make sure you’re spending your money on the areas renters value, not wasting it. Luxuries aren’t necessary unless you’re trying to attract the very top end of the market.
You need to concentrate firstly on making sure the property meets it’s legal standards, which means checking for structural issues and ensuring appliances are all serviced and safe. Refitting the bathroom is a good idea if it’s showing its age, but it’s more important that it’s functional than trendy.
Furnishing the house to a slightly higher standard than Ikea’s lowest tier of furniture is a good idea, as it doesn’t increase your budget much but the additional effort will stand out to tenants who have seen the same identikit furniture in every property they’ve viewed!
Finding Tenants
Advertising for tenants, credit checking them and ensuring they sign a binding contract can be testing, and if you get it wrong you might end up with people who damage your property, or don’t pay the rent on time.
The best option might be to opt to work with a letting agent, who have the experience and infrastructure to get this right for you, and while this will eat into your profits you might find it a worthwhile in exchange for the security it gets you.
