subject: Buy To Let Secrets You Cannot Afford To Miss [print this page] More than ten years ago, investing in buy to let was a goldmine. People made double-digit profits for hot properties all the time. However, the economic downturn has affected this industry so that in fact, average yields were down to 5.5 percent in 2007, which was less than half of what it was in the late 1990s. Nevertheless, investing in buy to lets today is not such a bad idea. Actually, if you know how to gain an edge over the competition, you still have a fair chance of earning more than they do.
Let us begin by identifying the general do's and don'ts for this kind of investment.
Do's
1. Do identify and analyse your target market. You need to decide whether you want to cater to families, students, or yuppies as tenants. Knowing your target market will help you decide what type of property to get, as well as the ideal location. Families prefer houses over flats; students prefer affordable and clean flats; and yuppies would want modern units that are conveniently located near their offices.
2. Do make a thorough research on the property you are planning to purchase. Once you have identified your target market, the next thing to do is to scout for hot properties. Make sure to check the market price so as to avoid overpaying for a property. You want a property that is in a safe and clean neighbourhood as this will attract more prospective lessees.
3. Do compare mortgage rates and deals. Get the lowest and most affordable mortgages by shopping around, and making appointments with several financial institutions rather than signing a contract with the first one you approached. Do not be in a hurry. Even a small difference in interest rates could amount to a lot of money when it comes to mortgages.
4. Do make sure you can be a good landlord. You must be hands-on with your buy to let investment so that you can monitor your tenants, provide maintenance and upkeep, deal with complaints and issues, find new tenants, and so on. If you are too busy with work or other businesses, you need to get an agent to oversee things for you.
5. Do invest to make a profit! Easier said than done, however it is important to always keep the end in mind. Draft out a plan for your investment, calculate potential earnings, and find out how you can earn more. To gain security, request deposits and advance payments; have tenants sign contracts and if possible, get insurance for your property. One good piece of advice is to require a tenant guarantee from each of your tenants, so that in the instance they default on rent payments, you will not be at a loss.
Don'ts
The one thing you should keep yourself from doing is allowing large families to rent your property. A family of three or four members is ideal; large families of five or six members is risky because with lots of children in the property, you would have to spend more on maintenance such as paintwork and broken fixtures. In addition to this, you also have to avoid purchasing big properties (with more than two rooms) because such properties can be very expensive and not many people can afford to pay rent for it.
