Being a buy to let landlord: Top Tips
20/07/2011 06:28:00
Taking on a buy-to-let property and being a landlord is not just a shrewd investment move in today's economy, it's providing an essential service.
Taking on a buy-to-let property and being a landlord is not just a shrewd investment move in today's economy, it's providing an essential service.
According to the Association of Residential Letting Agents (Arla) the UK's private rented sector is being used more and more to take the pressure off a housing market which is impossible for first-time buyers to enter.
As a result, the rental sector is currently buoyant. Recent figures released by Endsleigh show rental prices in the UK have increased steadily over the last two years. Since 2009 rents have gone up by four per cent.
This is great news if you are a landlord, or considering becoming one. But if you are reading this as a tenant, you might want to pour yourself a strong drink before reading on – particularly if you live in London.
Endsleigh said the highest rental prices are in the capital city, where the average property is £1,372 per month – double the average price in the UK, which has reached £700 per month.
Scotland, meanwhile, is the cheapest costing the average tenant £299 per month to rent a property. Carlos Thompson, of Endsleigh, said: "The increase in cost of renting across the UK shows that despite the recession the lettings market has remained strong, which is great news for landlords and letting agents."
Meanwhile, with the average weighted rental returns, according to Arla, for both flats and houses coming in at five per cent – higher than the average interest rate earned through savings or a cash ISA – it's no wonder so many are considering buy-to-let.
But entering this marketplace can be a daunting prospect if you've never dipped your toe in before. Being armed with some helpful information to ensure you don't trip up can be invaluable.
If you think buy-to-let is the investment path for you, here are some expert tips to help you get going.
Do your research
As the statistics from Endsleigh suggest, the key to buying a property which will earn you a decent yield is to choose the right location. (see our article explaining rental yield).
But it's also just as important to buy the right property. It would be a wise financial move to buy a property in an area set for regeneration, or where a large amount of jobs are about to be created.
You may not find such great prospects in buying a large four-bedroom family house to rent in an area with no schools, or poor schools for that matter. Arla says it's important for potential landlords to remember buy-to-let is a solid, long-term investment not a quick money-making scheme.
It points out the rental market suffers ups and downs, and behaves very differently from region to region, so it's critical that you select the right property in an area you have researched in detail.
Ian Potter, operations manager at the organisation, added: "Buy to let properties can prove to be a sensible, long term investment, but consumers must do their research in order to achieve success."
Arla recommends talking to a regulated letting agent who is based in the area you are thinking of buying your property. They should be able to provide you with an insight into what makes the local property market tick.
But it's worth looking at other sources too. For example, Paragon Mortgages recently published research revealing students and young singles generated the highest yields for landlords.
While the average rental yield in the UK is currently 6.2 per cent, the investigation found this figure rose to 6.45 per cent for students and 6.22 per cent for young singles. And before you slash quiet seaside retreats off your list, the research also revealed retired people as being among the most lucrative yield providers, generating averages of 6.16 per cent.
Nigel Terrington, chief executive of Paragon Group, said: "Student yields typically outperform the wider market because they are let on a per room basis, which can generate higher rental income."
But remember, these high yields can come at a price. Mr Torrington added: "On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models."
Use the Myfinances.co.uk comparison tables to find the best deal on a buy-to-let mortgage
No comments:
Post a Comment