As a complete beginner, getting started in property investing can be an exciting but daunting prospect. There are plenty of factors to consider in order to make your new venture as a landlord a success, from how you’ll finance your property purchases to the leasing strategy you’ll use and where in the UK you plan to buy your first buy to let.
"However you choose to pay for your property, it’s important to figure out the finances early on to ensure you can comfortably afford to invest regardless of how the market changes and how market interest rates fluctuate"
This guide will take you through the main considerations you’ll need to make before starting to expand your existing property portfolio.
Determine your leasing strategy
The goal of your buy-to-let venture is to make a profit, so before you start putting money down on a development, you should determine what your leasing strategy will be.
Do you want to be a private landlord and deal with tenants directly or do you want to hire a rental management company to take on these tasks for you?
Many people choose to use a third party to avoid problematic tenants and confrontations, but naturally, this will eat into your profits, so it’s worth weighing up the pros and cons for your circumstances. It’s also worth deciding whether you’ll be renting an unfurnished or furnished property to your tenants.
Decide how you’ll finance the property
You may have been saving for years to start investing in property or you might be using inheritance as a down payment. Alternatively, you might be using the funds from another property to help fund this stage of the process, coupled with an equity release mortgage.
An equity release mortgage enables homeowners to release some of the value tied up in their existing property to withdraw a lump sum, without having to sell the home itself. Although typical for older individuals (usually over 55 years) equity release can be a viable option for people looking to expand their property portfolio.
However you choose to pay for your property, it’s important to figure out the finances early on to ensure you can comfortably afford to invest regardless of how the market changes and how market interest rates fluctuate.
New builds or older properties?
When looking to expand an existing property portfolio, there are advantages to both new and old properties, as well as financial considerations to be aware of.
New builds have a layout and design that will appeal to renters looking for a contemporary property and they’ll require less maintenance for the first few years as everything will be in good condition. However, they will cost you more upfront and this might not be a possibility if you have a smaller deposit.
Older properties are usually more spacious, and the completion process can be faster, as you won’t be waiting for construction work to complete. You’ll also have the opportunity to hunt for a bargain to make your money go further, which can be better for your bottom line.
Whether you choose a new build or an existing property will impact your property search, so it’s a good idea to weigh up which will offer you a better return before you start looking for a buy-to-let to purchase.
Research the location
Location plays a huge role in the success of a buy-to-let investment, so you need to think about what your tenants will be looking for. The more accessible the location, the easier it will be for tenants and the more likely it will be that the property will increase in value over time. While cities are typically easier to find tenants for, it’s also worth bearing in mind that properties in cities are usually more expensive.
Consider who you will primarily be renting to – if you’re renting out a house, the tenants are likely to be families, in which case access to schools, hospitals and childcare services will be key. However, if you’re letting out a flat in the heart of a city, it’s likely to be students and professionals looking to become tenants, so public transport links will be a priority.
The property market has exploded over the past couple of years, and many are looking to invest now, particularly in major UK cities.
But before you put money down and sign on the dotted line, it’s vital that you do your research and speak to professionals to help you make a sound investment decision when looking to expand your portfolio.
From the size and location of the property to the rental demand and the likelihood of the property value rising, there’s plenty to consider.