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Guide for first-time landlords. Part 1: An introduction.

POSTED: 27th July 2015
IN: Landlord helpful guides
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In the 18 years since the buy-to-let mortgage was first introduced, property investment has grown in popularity. There are currently more than two million buy-to-let investors in Britain alone, and together they own £1 trillion worth of property. Due to the growth in demand for rental properties, one in five homes is now owned by a landlord.

Furthermore, research suggests that in 2015, the buy-to-let sector is likely to continue to grow. The study by Platinum Property Partners suggests that 43 per cent of existing landlords intend to grow their property portfolios this year. Although the Council of Mortgage Lenders (CML) point to a dip in mortgage lending, landlords are confident that house price growth will continue over the next five years. Forty nine per cent expect UK property prices to climb by up to 10 per cent, while 28 per cent expect an increase of 10 per cent or more.

Existing landlords aren’t the only ones thinking about their investments. Thanks to ‘Pension Freedom’ reforms, this year could see a number of retirees investing in property for the first time. From April, over 55s will be able to withdraw their pension all in one go, and research suggests that as many as 16 per cent of pensioners will be looking to invest in buy-to-let. 

For many, property investment can be a lucrative business. However, it’s important to remember that there is no fast track to success on the road to buy-to-let.

In this four-part series we’ll look closely at what it takes to become a successful landlord, including the legal aspects and management skills required to keep your investment running smoothly.

Is buy-to-let a good investment?

Buy-to-let is generally regarded to be a profitable investment in the UK, with the average rental yield currently around 5.9 per cent in September 2014. However, as any seasoned investor will tell you – being a landlord can be hard work and you’ve got to be prepared to put in the time to reap the rewards.

Similarly, while both rental yields and capital gains are likely to see your investment grow over time, it’s important to consider that the property market is subject to fluctuations. House prices can go down as well as up; a good investor should be prepared to be flexible with their property plans in order to see the best results.

For many keen investors, a foray into the buy-to-let world is a really fruitful, rewarding investment. The key is to make sure it suits your lifestyle before you commit.

Is property investment for you?

In the early stages of a buy-to-let investment, finding the right property for your purpose is crucial to ensuring that your venture is a successful one. Becoming a landlord is a long-term commitment - and the job doesn’t start and end once the property has been purchased, decorated and filled with tenants.

Though most investors find managing their buy-to-let properties fulfilling – and well worth the commitment for the return that they see on their investment - budding landlords would be advised to consider the pros and cons before buying a property.

Of course, there’s no ‘ideal’ personality for being a landlord and the spectrum of buy-to-let investors is broad. However, depending on how much cash you have to spend on third-party management (e.g. a letting agent), there can be quite a bit of work involved. If you’re thinking of devoting part of your life to managing property, there are a few qualities that it might help to possess.

Firstly, it helps to be positive and proactive. Many landlords choose to devote a great deal of time and money to promoting their property in order to attract quality tenants, who are likely to stay in the property for a good period of time without causing any trouble.

The reason many people choose to rent instead of buy property is the flexibility it allows. If and when your tenant decides to vacate, it’s important to find a replacement as soon as possible to avoid a ‘void period’ – as this can affect your annual yield.

Likewise, you will need to be available (or prepared to pay an agent to be available), to conduct ongoing maintenance or respond to tenants in the event of (for example) plumbing issues. Again it’s important to take a proactive attitude towards your tenants’ needs and be seen to be contactable, so you can resolve any problems as soon as possible.

Be prepared to get involved

With a buy-to-let investment, there’s always an outside chance that your tenants could end up being late payers or causing damage to your property.

In the grand scheme of things, this is relatively rare. If you put the time in to vetting your prospective tenants and subsequently managing the property (by conducting quarterly checks, for example), then you’re much more likely to have a positive experience.

In the event that you do experience issues, it’s important that you’re prepared to confront problems in a composed, authoritative, and unemotional manner. You need to address issues that could impact the income on your property, while also ensuring you follow the correct procedures before resorting to evicting your tenants.

As with any business venture, there are rules and regulations in place that andlords must abide to by law. These rules can be a little complicated to follow and adhere to, so it’s advisable to make sure you set some time aside to understand the administration needed as a landlord, including completing and filing the necessary paperwork on an ongoing basis. Alternatively, if you choose to employ a letting agent to help you manage your property, they should be able to help you with the majority of this.  

There are a great many positives about being a landlord – but like with any investment, sometimes you’ve got to take the rough with the smooth. Having the ability to deal effectively with any drawbacks as and when they arise is all part and parcel of being a successful buy-to-let landlord.

Have a back-up plan

To make a solid investment in property, it’s advisable to approach it from a relatively solid financial standpoint. This is because even once a buy-to-let mortgage has been secured and the property has been purchased, it’s still possible that costly changes (such as a boiler replacement) could arise in order to comply with buy-to-let legislation.

Becoming a buy-to-let landlord

In the remaining three parts to this series, we’ll be looking at aspects of making a first buy-to-let investment in detail, including:

Part two: The Right Property

In part two of the series, we’ll take a look at how landlords can find the best property for them.

Part three: Getting Ready for Tenants

In part three, we’ll look at how you can get your property ready for tenants, including managing paperwork and getting to grips with legal responsibilities.

Part four: The Realities of Buy-to-Let

Part four, the final instalment in our buy-to-let series will look at how you can find and manage your tenants. You’ll learn how to manage your property and ensure that everything runs as smoothly as possible.

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