The buy-to-let market has been an opportunity for many investors. Current trends of rising rents, increasing home values and low interest rates have made the market very favourable to landlords. However, there are those who have also lost every cent in it.
Like any other endeavour, There is no exact science on how to succeed in real estate investing. But there are concrete steps you can take to make the odds more favourable for yourself.
Here are eight tips to keep in mind if you’re thinking about investing on a buy-to-let property:
a popular choice of property investment in the UK, because many people have amassed a boat load of money from this strategy. If you want to replicate their success, here are top 8 tips on how you can become a millionaire with buy to let.
1. Keep a record of everything
A successful landlord keeps a record of everything from building plans, permits, tax payments, to every single lease agreement he has with every tenant. You can use ready-made software to keep track of your book keeping, but many investors choose to create their own filing system.
This helps minimise tenant disputes, keep track of regulatory changes, and even keeping the taxman from knocking at your door unexpectedly.
2. Insure your investments
Securing a landlord insurance isn’t considered an unnecessary cost nowadays as incidents of tenants trashing rental properties increase continue to increase in the UK. There are a variety of specialised policies available out there for buy to let investors depending on their budget and the coverage they want.
3. Specialise in one area
While being a jack of all trades is essential to learning how each segment of property investment works, sometimes it’s better to focus your energy in one field and master it to the best of your abilities in order to maximize your profits out of every transaction.
An attractive strategy for many buy-to-let investors right now is the HMO. This is where landlords buy one building, formerly used by a family unit, and then let multiple tenants, with different tenancy contracts, live in that property together. Other specialized niches are luxury properties for rent, student properties, and properties specially catered for individuals receiving housing benefit.
4. Chat up other investors
Like the popular saying goes “no man is an island.” If you’re just starting out as a buy-to-let investor it’s advisable to surround yourself with like-minded individuals, especially those people that have been doing buy-to-let investing for such a long, long time they already know the ins and outs of the market like the palm of their hands.
If you’re having trouble finding people like this, just connect with the UK’s 2 major organizations for landlords: the Residential Landlords Association and the National Landlords Association.
Finding and screening tenants for your investment property is such a long and difficult process, which is why some buy-to-let investors hire a lettings agency to do the work for them. Unfortunately, comfort comes at a high price as this will actually cost you 10 per cent of your annual income! So don’t get lazy.
Those who are in the industry to really make some money out of buy-to-let strategies do the work themselves. What they do, on the alternative, is to grow first their property portfolio, and then hire someone on a part-time basis.
6. Don’t depend too much on price hikes
Counting on house prices to rise within the passage of time is one of the oldest and most popular way to do property investment, because you just let the property sit there and increase in value. There’s nothing wrong or illegal about this. However, remember that waiting for capital gains is like waiting for rain on a sunny day. It may or may not come. Either way, there’s no exact guarantee or way to tell.
Property investors in 2007 and 2008 had to learn this lesson the hard way. Since house prices dropped rock bottom, a lot of people ended up owing more than the value of the house they purchased.
7. Break away from the model
A lot of buy-to-let investors swear by taking risks in property investment. Cathy Colston, an investor from Bath, Cardiff, and Bristol, admits that if you want to maximize your profits and eventually live-off your earnings from buy-to-let investment, investment properties need to converted and refurbished to add value. This is a total 180 degree turn from the “armchair” investor’s idea of buying to let.
8. Be wise about borrowing
While getting new mortgages is the norm and it could lead to a pretty nice income when done right, this isn’t always the best and most efficient way to get in a property deal. You’re never really sure when the market conditions will change, and you’ll end up with a huge debt like what investors learned during the global financial crisis.