At first look, investing in buy-to-let properties seems easy enough. Buy a property, find some tenants, and watch the rent roll in. Unfortunately, nothing is ever that simple.
The internet is full of unsatisfied investors warning potential investors away from buy-to-let properties. The truth of the matter is you can make money–and a lot of it at that–if you If you want to avoid losing your hard earned money on a bad buy-to-let investment follow these tips.
Research Potential Properties Thoroughly
There’s a lot of calculus that goes into make a prudent buy-to-let property investment. Some less wise investors stake all the money whether or not they think a neighborhood’s rental price will rise. While a declining or increasing rental price is definitely an important factor, it is a notoriously fickle measure. Instead savvy buy-to-let investors look at several neighborhood factors before they decide to purchase a specific property.
Neighborhood infrastructure is often a key indicator of stable rental prices. If the property you are looking at is close to a major hub of transportation or has nearby amenities such as beautiful parks or easily accessed shopping centers, then that property is more likely to have a higher more sustainable rental yield in years to come.
Neighborhood statistics like high crime rates will often negate otherwise great property selling points such as nice views and modernized appliances.
In essences, it is better to purchase a good property in a great neighborhood than a great building in a bad neighborhood. This will lead to a property with fewer vacancies as well as better and more sustainable rental profits.
Don’t Be Afraid to Negotiate
So you’ve found a few properties that passed your thorough vetting process, now what? Now you haggle. This is a business venture. You must be prepared to negotiate if you want the best return on investment possible.
The best thing about entering into a property negotiation for a buy-to-let investment is that you have natural leverage. You can walk away from the table at any time without any major repercussions and the realtor across from you knows that. If this property doesn’t work out, you can always take your investment to the next property.
This additional leverage–if applied correctly and confidently–can save you a lot on upfront expense on a lower down payment as well as on recurring costs as a lower sticker price means lower mortgage payments.
This fearless negotiation style can also serve you well when looking for a mortgage deal. Don’t be afraid to shop around for mortgages. Do some preliminary research before you ever step foot into a bank. The more knowledgeable you are, the less likely you are to accept a bad mortgage that you might be stuck with for twenty years or more. If the first bank’s rates seem excessive you can always go to the next.
Protect Your Property
Unexpected catastrophes happen. When they do you can lose more than your investment if you aren’t properly prepared.
Every buy-to-let property must have Building Insurance. However, Building Insurance only goes so far toward protecting your investment. Many savvy buy-to-let property investors make sure to research landlord lnsurance from a reputable broker in addition to the required Building Insurance.
Landlord Insurance is a must have when life throws a catastrophe your way. Depending on the policy you select, it can pay for lost rent after an accident forces out your tenants as well as for some of the repairs.
Without the Landlord Insurance you would be paying potentially hundreds of thousands of pounds for repairs with no rental income to offset costs. The Landlord Insurance can also help pay for tenant relocation costs after an accident. Without it you could be on the hook for a lot more money than you invested into the property to begin with.