Renting is on the rise in the UK. This is largely due to a lack of affordable housing, prompting many to rent, as opposed to buying a home.
Although this spike in demand is good news for landlords, it can be tricky for new landlords to know how to make the most out of their investment. Read on to learn how to make money from your buy to let.
Find the right tenants
Finding tenants is arguably one of the most important parts of being a landlord. However, it can be tricky to find upstanding tenants that will pay rent on time and take care of your property.
In order to reduce the risk of acquiring problematic tenants, it’s wise to have a thorough tenant screening process. That way, you can make sure that tenants are financially responsible and will be able to keep on top of their rent payments.
Yes, good credit is important when it comes to renting your property. But a thorough tenant screening process will also provide information about the prospective tenant’s character, criminal history, and their plans for the future – all of which will help ensure the safety of both you and your tenants.
Taking steps to get to know your tenant should also help to prevent a high turnover rate. A low turnover rate will make your property more attractive to prospective tenants when the time comes to filling the vacancy, which in turn will reduce void periods and keep the rent coming in.
Choose the right property
It’s equally important to find the right property to invest in. If you’re planning on selling the property for a higher price later down the road, then it’s a good idea to look for a property in an area with potential for capital growth. If you’re looking for a property with a potentially lucrative rental yield, however, it may be worth looking into a cheaper area of the rental market.
Remember, it’s important to choose a property that is close to you. After all, the closer you are to your property, the easier it will be to manage your investment. Plus, you can use your understanding of the area to plan for upcoming infrastructure and transport plans or to even prepare for potential issues that might impact your investment.
Crunch the numbers
Of course, every landlord would like to get a high return on their investment. But it’s important to be realistic about how much rent you can charge. While you can decorate your property to increase the value, a couple of nice paintings will likely not sway most tenants to pay more rent.
With this in mind, it’s important to make a financial plan. Think about how much you’re willing to pay for a property, the likely rental yield and when you can expect to see a return on your investment.
Plan for void periods
For many, the ultimate outcome of investing in property is to fund retirement. That said, even though there is currently high demand for rental properties across the UK, it’s a good idea to prepare for times when your property is unoccupied. Think about how will you pay your buy to let mortgage if rent isn’t coming in.
When you do have tenants, it may be worth putting some money away into your savings. That way, you can cover your mortgage payments or even pay for repairs during void periods. Don’t forget, you can always use the money if you need to – at least the intent to save is there!
Get landlord insurance
Even if you find the right property and tenants, there are a few things outside of your control that could impact your investment. For extra peace of mind, it’s worth investing in landlord insurance. After all, it can help protect your property against insured events, such as a flood or fire.
If you’re worried about the cost, it’s always wise to compare landlord insurance. That way, you can rest easy knowing that you’re getting the best policy for your property and your wallet.