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Buy-to-let is increasingly popular among seasoned investors and first-time landlords alike, and pension pot self-investors in particular are turning to property as a source of retirement income. If you are getting into buy-to-let for the first time, there are a number of important tips that you may want to bear in mind.
Do Your Homework
It is important that you firstly research which local market you want to invest in (and this doesn’t necessarily have to be right on your own doorstep), and then get to know that market in-depth. What kind of property tends to succeed in that market, and what features or assets are people looking for in those properties? How is that market expected to progress over the next few years, and what is its risk profile like? These considerations will serve both to help you choose the right location, and to pick a property in that location that suits your investment goals well.
Shop Around for Mortgages
Your mortgage will most likely be the single biggest expense eating into your returns, and different deals from different providers can vary a lot so it is worth putting time and effort into making sure it is as low as possible. Don’t make the mistake of talking to only a few providers, and certainly don’t just take whatever your current bank or the provider of the mortgage on your home offers you – though it is worth speaking to them to see if they offer any attractive packages for existing customers. Compare as many different deals as you can in order to find the best.
Account for Costs
Your mortgage will probably be the biggest expense associated with your investment, but it will not be the only one. There will be some level of ongoing maintenance costs associated with your property, and while some elements such as the annual gas safety certificate are predictable, others are likely to be at least somewhat unexpected. Consider also whether you want your property to be managed for you. Many landlords prefer this as it makes for a very hands-off investment, but management fees will represent another expense you should take into account.
Invest for Income
While this is not universal, most first-time landlords will probably find it is better to invest for income, at least in the short- and medium-term. Property is rarely if ever a shorter-term investment anyway, so worrying about growth in anything less than the long term could prove to be a moot point. Rental yields, on the other hand, contribute directly to your income and will impact on how your investment performs in a practical sense throughout the time you hold it.
Plan for the Worst
While nobody likes to soften the excitement of their first property investment with pessimism, it is important to have contingency plans before buying an investment property. In particular, have an exit strategy for when you want to liquidate your investment again, whether that be planned ahead or a response to some unexpected development. You may one day be very glad that you were prepared from the start.
Hopwood House are UK investment property specialists, with a wide range of buy-to-let investments in the UK residential and student property markets.
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