Choosing a buy to let property

As a buy-to-let landlord, your choice of property can make all the difference as to whether your investment is successful or not. Pick the right property and you could enjoy a steady stream of tenants - and healthy rental income. Make the wrong choice and you could struggle to balance the books – and find yourself threatened with mortgage arrears.

Use your head, don’t follow your heart

So how do you choose a buy-to-let property? First of all, you shouldn’t let you heart rule your head. You are not buying a property in which to live, so you should not necessarily let your personal preferences influence your decision.

Set a budget

Next, work out your budget. This will dictate both the type of property you buy and its location. You might hanker after a four-bedroom town house in Mayfair, but you might only be able to afford a two-bedroom flat in Manchester. So start with some research into house prices, as well as the typical rents being achieved in the areas you plan to buy in, to get some idea of properties in your price range.

Buy-to-let mortgages

Remember to include the mortgage in your calculations. Most landlords take out a buy-to-let mortgage to fund the purchase and the lender will probably demand a deposit of at least 25%. They will also insist that the rental income is 125% of the monthly mortgage payment. In other words, if the mortgage costs £1,000 a month, the rent should be at least £1,250.

Financial strain

Don’t stretch your budget to the limit as you might struggle to pay for any unexpected expenses. You might also find it difficult to cope with any long ‘void’ periods, when the property is empty. You should also be prepared to lower your expectations or widen your search area if the sums don’t add up.

Start with some research into house prices, as well as the typical rents being achieved in the areas you plan to buy in

Type of tenants

Tenants tend not to want to live in the middle of nowhere, cut off from transport links and local amenities. But the exact location will depend on the type of tenants you hope to attract. 

Families want to live close to schools. Young professionals are more interested in good transport links as well as sports and leisure facilities. If you want to let your property to students, you should obviously try to buy somewhere close to the college or university campus. 

The choice of tenant will also largely determine the type of property. Families don’t want to live in inner city apartments, for example. The layout is also important, particularly if you are letting out shared accommodation. 

New or old?

Some landlords prefer new-build properties because they can be easier to let to fussy tenants. There should also be fewer maintenance problems with a new build property. But older homes have more character. You might also be able to pick up a bargain if you buy a character home in need of renovation – as long as you are prepared to do the necessary work to make it ready to rent.

Green fingers

Most tenants appreciate some outside space and a garden will probably add to the marketing appeal of your property, especially if you are targeting families. But bear in mind that gardens can be costly to maintain. You don’t want to spend a fortune looking after precious plants, and you can’t necessarily rely on your tenant’s green fingers. So try to keep any garden as low maintenance as possible.

Hard bargain

You should look at several properties – and view your favourite more than once at different times of the day. And don’t forget that you are in a strong negotiating position because you are not involved in a chain. So don’t hesitate to drive a hard bargain.

Remember that choosing the property is just the first step. Read our guide on landlord responsibilities and take a look at our list of landlord insurance providers to help you get the right policy to meet your needs.

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