A Guide To Successful Buy To Let Investing

Jane Wardle

Written by Jane Wardle on January 14, 2019

Updated June 4, 2019

Buy to let sign and houses

The rise of renting in the UK has made the prospect of buy to let investing a pretty interesting one to many people. Investing in a property and renting it out can be a very profitable way of using your cash, but only if you do it properly.

In recent years there have been tax reforms that have made buy to let investments a bit more difficult, but they are still a popular option. Many people prefer the idea of investing in a brick and mortar property over an investment fund or stocks, and a property gives you the chance to add value to the home to increase your profits.

Investing in buy to let properties and creating your own portfolio is no easy task, and there is some basic knowledge that you will need to know before you begin planning your investments. If you are considering property investments, then read on for our guide to successful buy to let investing, and some top tips for making the process easier.

Why invest in property?

The current state of low interest on savings and the stock market constantly changing has made buy to let investing an appealing option. Mortgages are relatively cheap, and interest rates are low compared to recent years, making purchasing new properties an enticing investment opportunity for those with enough funds to raise a large deposit. House prices are currently on the rise, and many investors are looking to secure properties now and hoping their value continues to rise.

With more and more people in the UK looking to rent properties as opposed to buying, mainly due to Generation Rent being priced out of the property market, there is more demand than ever for buy to let properties. Landlords are reaping the benefits of this renting boom, and it is only expected to continue to grow in popularity in the future.

Be careful of low rate mortgages, as one day they will have to rise again, and you must be sure that your property investment can withstand that increase.

Research the buy to let market

Rental home

When you are considering investing in buy to let, it is vital that you properly research the current market and understand all the risks and benefits. It is a big decision, and you will be tying up a large amount of money in a property that could be at risk of falling in value.

Choosing to invest in buy to let is a big commitment both financially and timewise, and in most cases, you will be required to take out a mortgage for the property. If house prices continue to rise, then you can make a nice profit on your investment, however, if they fall, then you may end up paying a mortgage on a property that has dropped in value.

Think carefully about where both you and the property market might be in five years’ time. Thoroughly research the market predictions in your local area to get an idea of how things may change.

Do your buy to let maths

If you have decided that buy to let is where you want to invest your money, then before you start looking for the ideal property you should think carefully about the finances involved. Work out the cost of the properties you are considering and the amount of rent you are likely to receive for them. Most buy to let mortgage lenders will expect your rental income to cover 125% of the mortgage repayments, and you might also be required to pay a 25% deposit.

Once you have worked out these numbers, you need to be realistic about whether your investment is realistic and is likely to bring you any kind of profit.

You should also consider what would happen if the property is empty for some time, as you will still need to make the mortgage repayments when you are receiving no rental income.

Consider renovating and looking elsewhere

A great way of boosting the value of an investment property is to purchase a home that needs improvement. Properties that are in need of renovation will often sell for much less and can be negotiated to a reasonable price, and then the value can be added later on. If you choose this route, you should bear in mind that you will also need to pay for the renovations as well as the property itself. If you need assistance with finance then compare home improvement loans here on Lending Expert.

You will also be paying for the property and covering the mortgage payments with no rental income while the work is carried out. Another option is to look at buying properties further afield than your home town. Many landlords prefer to invest in properties close by, but other areas in the country might be a better investment.

When buying a property as a buy to let investor, you have the same benefits as being a first-time buyer, in that you have no chain. This can be used for negotiating a lower price as there is less risk of the sale falling through.

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