Why Buy-to-Let is Booming ? And Tips for Doing It
The Council for Mortgage Lenders says buy-to-let lending has risen a tenth since 2011, while the number of UK private landlords is set to pass the million mark in the next couple of years.
Factors behind the boom include the Bank of England’s £80bn Funding for Lending scheme, which one newspaper commentator has described as “the opening of the loan tap.”
Another reason is the marked increase in recent years in the need for rental flats and houses, together with a shortage of suitable properties. Rising demand may be down to first-time buyers who want to rent while they save for a deposit, or families who want to live in the catchment area for a particular school. Equally, with 500,000 people coming to live in Britain from abroad every year, and few of them buying a home immediately, inward migration is another factor.
As a first-time Landlord you will need:
- A viable rent protection
- The right mortgage – most buy-to-let sector are interest only, but shop around
- The right type of property – some have had their fingers burnt with new builds, but these are not necessarily always a risk
- To know your local area and market well, and be realistic when it comes to pricing. Do your research and think about why someone would want to live in a particular area. If your nearest town doesn’t seem to offer the best value, consider looking further afield.
- To think about your target tenants – students, families, young professionals – and whether your property is suitable for this market.
- To look into rent guarantee insurance against tenants not paying their rent.
- To consider how to manage the property and tenants. How hands-on do you want to be? With 70 pieces of legislation to comply with, it’s a lot for any private investor to manage single-handedly. This is where a letting agent can offer an invaluable service – but choose yours carefully since the industry is not yet fully regulated. But Landlords who use an ARLA registered agency like Drummonds have peace of mind. They are protected if tenants don’t pay, while, for tenants, it means they are dealing with an agent who is fully trained, has an audited client account and follows stringent rules with independent redress.
Remember that, as a buy-to-let landlord, you are not part of a chain and can use this to your advantage when haggling over price.
Finally, go into any deal with a clear idea of all costs and any potential pitfalls involved, and invest for income rather than short term capital growth and you will put yourself in the strongest possible position.