Eight steps to ensure success in buy-to-let property
Investment opportunities are plentiful. Not all are good, but when you buy in the best places to invest in property UK, you’ll benefit from the confidence that is growing in a strong buy-to-let market. Just how do you make a great buy-to-let investment, and benefit from long-term income and capital growth?
Follow these eight steps, and you’ll be on your way to taking advantage of the best investment opportunities in the UK today.
1. Get educated about property investment
Get some investment education before you start. One of the best things about property investment is that it’s so much easier to understand than other forms of investing. That’s why beginner investors can make such great investment decisions. However, it always pays to know what you’re investing in and why, and then put into practice the strategies that have been used successfully by other investors.
2. Find the best location for investing in buy-to-let property
Find the best location, and you’ll be close to finding the best buy-to-let investment opportunity. Think infrastructure and what people who live there want from their locale. Look for shops, schools, transport links, major employers and major investment. Proximity to work, nightlife, and other entertainment amenities are all important to today’s lifestyle renters.
Don’t make the mistake of searching only for properties near you. If you do so, your investment returns will probably suffer. A £200,000 buy-to-let property that yields just 1% extra per year will increase your cash flow by £2,000 in year one. Over a 20-year investment term, and if the property increases in value by, say, 8% per year on average, you’ll benefit from more than £100,000 in extra rental income.
(Tip: commuter towns and regional cities are producing some of the best growth and rental yields in the UK right now.)
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3. Do your cash flow and due diligence
Learn what you need to know about positive cash flow property, and how to calculate conservative cash flow projections. Never take an agent’s word for potential returns. Do your rental research, factor in void periods, and make sure you take advantage of the benefits of using a buy-to-let mortgage broker.
Make sure that you also keep a reserve fund available, to cover unexpected buy-to-let maintenance needs and void periods. If your property is empty, you’ll still have to cover the mortgage, utilities, and council tax. It pays to be prepared financially.
4. Don’t invest with your emotions
It can be tempting to jump right in when you see a property which promises fantastic returns. Slow down. Get rid of those emotions, and take your time to negotiate on price and search out the best financing. An emotional investment usually turns out to be the worst possible. Remember, property investment is all about the numbers – you’re buying boxes that make money No more, no less.
5. Think about your target tenant
Get a feel for the market where you’ve decided to buy. Who is the usual tenant? What do they want from a property? Young professionals have different needs to families. Revisit the property fundamentals and make sure your location and property offer these.
6. Don’t get caught up in short-term thinking
Making real wealth from property investment and buy-to-let is a long-term game. If you invest for short-term capital gain, you rely completely on the market going in your favour. If you invest for great yield as well as potential capital growth, you’ll benefit from the long-term outlook for the UK property market.
Long-term investment in property smooths the ups and downs of the property trend cycle. They don’t worry about what the price of their property will be in six months. They’re way savvier than that.
7. Have an exit strategy
Always consider what might go wrong. Have an exit strategy for unexpected events. How long can you subsidise a void period? Would you need to sell if you lost your job? Sure, you’ve invested for the long term, but life may change. Know your objectives, and consider how you would handle setbacks before they happen.
8. Think about whether you want to be a landlord or an investor
Buying the best property investment opportunities is only the first step. You’ll need to find tenants, manage them, collect rent, coordinate property maintenance, and do all the other things that come with being a day-to-day landlord. Or you might decide (like I did) that you don’t want all that hassle. You just want the income and profit. If you want to be an investor rather than fall into the trap of becoming a full-time landlord, you’ll need to consider hiring an investment property manager.
If you’d like to learn how you could shape your future with buy-to-let property investment, contact one of our team today on +44 (0)207 923 6100. We’ll help you define your goals and strategy, and find the best investment opportunities to make long-term income and capital gain in buy-to-let.