If you are thinking of becoming a landlord and purchasing investment property, we have some tips for you to consider. Buy-to-let property investment is still profitable in 2021. Management of rental properties and taxes have been changed and made investing slightly more complicated. However, there are ways to adapt to these changes. And with a long-term strategy, investors can earn profitable incomes in the short and long term.
What is Buy-to Let?
Buy-to-Let (BTL) is buying an additional property to your main residence with the intention of renting it out. A Buy-to-Let property is typically chosen because of the passive rental income it can deliver, as well as the natural price growth it can experience.
Advantages of buy to let:
- You’ll earn rental income (though possibly less than in previous years). In some areas of the UK, such as Liverpool, Glasgow and Leicester, rental yield is as high as 8%, while other areas are around the 3% mark.
- At the same time, you could generate capital growth as your money grows as your property value increases.
- You can take out insurance to cover against loss of rental income, damage and legal costs.
1. Are You Cut out to Be a Landlord?
Being a landlord can be very stressful, as it’s not just a simple matter of sitting back and collecting rent from whoever steps through your door. You also have to source the right tenant, chase up said tenant to make sure they pay up each month and deal with maintenance, repairs and complaints.
You should consider looking into hiring a property manager as being a landlord can be more time consuming than you would expect. You’ll be required to deal with problems when they arise, and not when you are available. This can mean middle of the night phone calls and much, much more.
2. Secure a Downpayment
Investment properties generally require a larger downpayment than do owner-occupied properties; they have more stringent approval requirements. You will need at least a 20% downpayment, given that mortgage insurance isn’t available on rental properties. You may be able to obtain the downpayment through bank financing, such as a personal loan.
3.Find the Right Location
The importance of location in real estate purchases always seems to be overestimated. The reason is that the location is what translates into profitability for the investment. Location, primarily, creates the desire for a purchase and the desire, in turn, creates demand which causes a rise in price. Check out our blog post on some of the best areas to invest in the UK for more information on the different types of areas and why they are beneficial for your portfolio.
Be realistic in your expectations. As with any investment, rental property isn’t going to produce a large monthly paycheck right away. Conduct market research and consider working with an experienced partner. Or, rent out your own home for a period to test your proclivity for being a landlord.