Buying, selling and letting - How to buy to let

Everyone is getting into buy-to-lets at the moment, but many do not fully appreciate that by entering this particular market they are starting a business – and a business has to make a profit to be worthwhile.

Firstly the buyer has to find the right property to invest in. Time and effort needs to be spent finding a property that can provide the best return. This means looking for a place in an area where demand for rented properties is strong and a property will rent for a good price.

Areas with lots of colleges and universities, industry and general opportunities for work provide the most buoyant letting areas – forget small towns and villages; they may look great, but unless they are near bigger towns and cities, they often have very low levels of letting activity.

Once you have located the desired investment property, financing is a stumbling block for most new landlords; but anyone who is already a homeowner can simply use the potential equity in their existing home to raise the deposit on their first buy-to-let property.

Before borrowing anything, it is essential that the buyer look into the projected rental income of their property. This can be compiled by researching others in the area and by speaking to local lettings and estate agents. This rental income figure acts as a financial forecast and will show the buyer how much money they can make from the property, as well as how much they can afford to pay on a mortgage and maintenance and preparation of the home.

These calculations are essential and will form the basis of the business plan of any buy-to-let venture. After all, there has to be some profit from the rent of the property once all of the outgoings are paid.

In most cases, mortgages will be the single largest outgoing of any buy-to-let venture and finding the right mortgage rate is crucial to profit – every part-percentage more a landlord pays on a mortgage is another chip out of any profit made. Buyers should find advisers that they trust and ask about their experience in dealing with mortgages for landlords, as this is a totally different market from owner-occupier mortgages.

This may seem complicated, but if buyers do their research and build relationships with independent estate and lettings agents and mortgage brokers the whole process becomes quite simple. Like most businesses of this size, smaller independent agents will offer buyers more free advice as they will be looking to build relationships with long-term investors.

And finally, once buyers find a property they like, it’s a good idea to find out what price it sold for previously (this information can be obtained on the internet) and negotiate the lowest possible purchase price.