On the surface many people seem to assume that the UK buy to let property market is relatively simple, easy to make money with little in the way of risk. In theory, the way that the UK demographic is progressing and the ever-growing demand for property, the UK buy to let market should be buoyant for many years to come but you need to be aware of potential dangers. The need to maximise your potential return while minimising your potential loss will become more evident as time progresses.
Researching the area
It is common sense to ensure that you have researched the area in which you are looking to invest, in great detail. You should know what is happening today, what has happened in the past and any plans for the future. Infrastructure developments, new businesses and a changing demographic may seem many years away at the moment but if you are looking to buy a property for the longer term, they will eventually come into play.
Choosing the type of property
When looking at the type of property you wish to invest in it is important that you look at this from a potential tenant’s point of view. You are not necessarily buying a property which you would rent, more picking a type of property which the local population would be interested in. This is where many people fall down, forgetting to look at this from a potential tenant’s point of view as opposed to their own particular taste in property.
Target your tenant group
If you’re investing money in the buy to let market it is paramount that you have a target tenant type in mind. That way you can see the potential in the short, medium and longer term and also mould the look and feel of the property itself to attract the tenant you are after. While many people have been successful with a “scattergun approach” by targeting a particular type of tenant you should be able to maximise your potential return. There is also the subject of tenant reliability which is often ignored until it is too late!
Shop around for finance
As with insurances, many people seem to stay with the same financial institution they have dealt with for years. This reluctance to look around for the best deals at the time may seem but a small detail but it can literally save you thousands of pounds in the longer term. It is also worth noting that the reams of paperwork in years gone by are very often replaced by online forms which are much easier to complete. There is no excuse for not shopping around for the best mortgage deal, especially with the buy to let market so buoyant and mortgage companies desperate for your business.
Beware of rental glass ceilings!
Perhaps the most common mistake for those looking at buy to let investments is spending too much money decorating and making adjustments to their property. This may sound bizarre, because surely the more welcoming the house the more chance of attracting a tenant?
Well, if you do your research on local properties you will find that there is very often a glass ceiling for the amount of rent that tenants will pay. You need to take this into consideration when decorating and making adjustments to your property because if there is a maximum rental figure in the region then it may well be counter-productive to overspend. The fact is that when buying any investment you need to have a payback period in mind and ensure that you stick as closely to your budget as possible.
In reality, buying a property should be about the facts and figures as opposed to human emotions!