We have talked to you before about “The Fear” and the things that might be stopping you from getting started. But you’re over that now and you know how much of a good strategy it is to start investing in property. (If you missed it, here it is.)
So, here are our tips for buying your first rental property.
Do your Sums
You’ll need to calculate and understand how a property will cash flow. Cash flow is literally the cash that flows to and from the property. Cash flows in, in the form of rental payments. Cash flows out to pay the running costs, which include mortgage payments, rates, utilities and any other associated fees.
Work out what YOUR cash flow figure needs to be and make sure that after costs, it’s still worth the investment. Very roughly speaking, with a standard buy to let strategy, your cash flow will be around 50% of the rent. So if you’re renting for £600 per month, your cash flow will roughly be £300 per month.
Choose a Property that Fits your Goals
Before buying an investment property, get clear on your goals. Some strategies are better for cash flow, so depending on your goals and experience, your strategy might differ from a standard buy to let. Check out our post on how to really set your goals here.
Irrespective of your strategy, some properties will always make better investments than others. Consider things like rental demand, ongoing upkeep, property values over time and location to make sure you’re choosing something that will attract a reliable supply of tenants.
Make Friends with your Letting Agent
A good lettings manager can help you attract, vet and install a tenant into your investment property. But did you know that they can help even before you’ve bought a place? As experts in the area, they’re a gold mine of information! They’ll be able to tell you what kinds of property tenants are looking for, where the best locations are and what rental demand to expect.
Location, Location, Location
If you want to attract tenants, location is key.
The perfect location depends on the type of property and what type of tenant you’re looking for. A stylish new off plan apartment for young professionals, for example, will be more attractive if it’s close to the city, good restaurants or entertainment. If your purchase is a four-bedroom house in the suburbs, attract families by choosing somewhere close to schools, parks and public transport.
How Would you Feel about Living there?
Once you’ve got the location down, think about what the property has to offer.
Before you buy, ask yourself what you’d want if you were a tenant. Remember that most tenants don’t plan on staying somewhere forever, and don’t have the same attachment to the property as a live-in owner.
There are definitely things that tenants look for when they’re choosing a property. As long as it’s fairly modern and presents well, there’s no need to go overboard.
Look for Something Low Maintenance
You don’t want to spend every weekend over at your investment property doing repairs and your tenant doesn’t want you there either. A property that needs a lot of maintenance can eat into your bank balance, your time and your peace of mind.
Do your Due Diligence!
Do your due diligence before putting in an offer, every time. It doesn’t matter if you’ve fallen in love with a particular property, or you made a promise to yourself to buy before the end of the financial year. The extra time and care taken will always reward you.
Some things you that you might want to consider before signing on the dotted line are:
Getting a building inspection. This will assess the property’s condition and tell you if anything needs attention. It might even give you some grounds for renegotiating the price.
Checking for other developments in the area. That lovely view might be under threat from a huge new shopping centre, or there might be planned infrastructure that can really help your property value.
Look out for our email over the next few weeks with our top tools for Desktop Due Diligence!
Consider How You’ll Finance It.
The property market is seriously hot at the moment and you might be up against some stiff competition. If you’re not using cash to finance your purchase, make sure you’ve got your agreement in principle in place so that people know that you’re serious and good to go!
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