Know the Risks with Buy-to-Let Property
25 June 2015 9866 Views
Recent surveys showed UK rental prices have hit a record high and it shows no slowing down. According to the figures, landlords are making a thirteen percent total return after a year. Before you start searching for properties, though, here’s a few of the risks you should take into account and the ways you can best prepare against them.
What’s Happening in Your Area
Over the last few years, buy-to-let landlords have been left tens of thousands of pounds out of pocket as they’ve failed to perform simple background checks on their area. Be aware of any new property developments as these could cut undercut your prices and leave you paying the price. For instance, if you’re planning on buying something close to a university to advertise to students, check if the school itself isn't planning to expand its student accommodation. These will be the first place students look to and could leave you with an empty property unless you lower the monthly rent. Work out the potential return on your investment by researching the rental yield of the area - that is, the annual rent landlords receive as a percentage of the original purchase price.
Renovating a Property
Buying a property that isn't in need of much work is the safest course of action. Similarly, a more recently built home will require less maintenance than a period piece. If you decide to renovate a rundown home, though, you make some big savings, especially if you’re prepared to do some of the work yourself.
Unless you have experience in the area, though, it’s generally recommended you seek out a professional contractor. Speaking to as many labourers as possible is the best way to find a good deal, but don’t forget to also consider the timeline they can work to. If you have little experience in DIY, the most common way you could help out is by doing the painting and decorating yourself.
Getting the Adequate Cover
The kind of buildings and content insurance you’re use to getting on your own home won’t be adequate as a landlord. This type of cover won’t be valid if your home is left unattended for over thirty days, and while you may not be expecting to have your property tenant-free, you need to be prepared for any slow periods in the market. Getting the right buy-to-let insurance from companies such as UKInsurancenet will cover you against as any damage left by the tenant as well cover you during your renovation period. Make sure the policy covers accidental damage against both sanitary and glass fittings, as these are by far the most commonly damaged fixtures in rented accommodation.
Buy-to-let can be an attractive proposition. The numbers have never looked better for landlords at the moment, but that doesn't mean you can disregard the risks. When the sums are this high, a mistake that might have been easily avoided can have big consequen