4 Steps to Buying a Rental Property.
Buying and owning a rental property should be treated as a business. Even if you are not planning on having a huge portfolio of property that you rent out, it’s imperative that you cross the t’s and dot the i’s.
It may seem complicated at first, but it need not be if you plan out what you need to do, when and how. You should also seek the advice and support of professionals, whether that’s a mortgage broker, an estate or lettings agent, or an accountant.
We have four essential top tips for you to think about when it comes to buying a rental property.
So, what are the four steps to buying a rental property
- Get your ducks in a row!
There are many things to think about when buying a property to rent out, but the most obvious is actually having the money to buy one in the first place! This could mean that you already have the means to buy a property, or you’re seeking a buy to let mortgage.
Either way, being able to show an estate agent that you are in a position to purchase is essential. Speak with potential lenders and outline what it is you are hoping to achieve and how much you need to borrow. There are forms to fill in about your income and your outgoings before the lender is able to tell you whether or not they are likely to give you a mortgage offer.
Remember, an agreement in principle will help you show estate agents and vendors that you are serious about purchasing and have the means to do so..
Top Tip You will need to have information to hand about your financial affairs, so make sure you know all the details.
- Speak to the right people to get the right advice
Buying a property entails a lot of legal work. Unless you are trained in such matters, you will need a solicitor who knows the buy to let property way of doing things. If you’re buying as a limited company this is another difference too, so someone experienced in such matters should be engaged.
An accountant who understands your financial position can work out the correct taxes that need to be sorted when the time comes. Buying to let may be a sound financial investment but get the tax side of things wrong and you could be in for an unwanted and hefty bill at some point.
Top Tip Do your research and ask people for recommendations.
- Location, location…yield
So, you’ve got your ducks in a row, and you’ve spoken with your mortgage and financial advisers. Now, what about the property?
- What sort of property do you want?
- What sort of tenant do you want?
- Do you want students, an older couple, a family or professionals?
- Will you allow pets?
All these factors have to be taken into consideration because it affects where the property is and what type of property it is. Student properties may have a good annual yield, but you may not want the hassle of dealing with students, some of whom may be known for having parties!
You may also be set on a certain location, but a good lettings agent will discuss the right areas with you and advise whether or not your investment will be sound.
Top Tip Know your goals and what sort of a landlord you will be. Remember, it’s a business so it has to make business sense.
- To manage, or not to manage?
When you have a property you are renting out, there are all sorts of things you have to do. Like maintenance, for example. Sometimes, a tenant will call you to say that the boiler has stopped working or that the fridge is broken. Then, you have gas safety certificates to sort, and now electrical safety certificates too.
So, what sort of a landlord will you be? If you don’t really have time or the skills to do the work, then you should consider a managed letting service. By this, we mean an agent will find you a tenant, do the checks, and make sure the deposit is secured where it should be, and then manage the property for a fee. If you employ a lettings agent to manage your property, this could save you a lot of time and take a headache away from you.
Top Tip Be honest about how you want to run your property and make a choice that suits you.