Property is considered one of the safest investments you can make, but no investment comes without a degree of risk and it’s important to fully understand the risks and rewards. I have summarised some key areas to consider based on the many conversations I have with customers who are considering property investment for the first time.
How you will pay for your first buy-to-let property? If you plan to get a mortgage loan, you will require a substantial deposit. Buy-to-let mortgages also typically attract higher interest rates, so you need to ensure your projected rental income covers your monthly mortgage payments and other associated costs such as service charge, ground rent and property management fees.
Its also worth considering that most banks will not offer buy-to-let mortgages to people under 25 or those older than 70, or if you earn less than £25,000.00.
Lenders typically have stricter guidelines when it comes to rental properties. Though you can buy a primary home with a deposit from 5%, most banks require a much higher deposit if you are purchasing a buy-to-let. This is usually between 20% - 40% of the properties purchase price dependant on the lender, your financial situation and the property you are purchasing.
You will also need to consider one off purchase/ lettings costs that include:
Stamp Duty Land Tax (SDLT) - You will always be liable for stamp duty if you are purchasing a property to let, there is also an SDLT surcharge for overseas buyers. Visit the government website to ensure you are reading up to date guidance or speak to your solicitor.
Mortgage Costs - There are several costs associated with arranging a mortgage. These commonly include arrangement fees, valuation fees and broker fees. Speak to your broker for a full overview.
Solicitor’s fees - These vary hugely so do your research. Its always worth asking for recommendations!
Furnishing - We recommend furnishing your buy-to-let apartment. Costs vary dependant on furniture quality and apartment size, however the upfront investment will pay off in the long run. Most of our lettings enquiries are now for furnished apartments and you can charge between £100.00 - £150.00 extra for a furnished unit. In addition, furnished apartments look much more appealing on advertisements, so usually rent more quickly.
Lettings Fees - Most agents charge a tenant finder fee of 50% of the first months rent.
What kind of real estate investor do you want to be and what are your goals? Do you want to build a portfolio that can replace your current income, or are you just looking for a property to boost your income and future retirement? Always think about the long-term goals you want to achieve with investing, as this will help you stay focused.
One of the most important decisions you’ll make as a property investor is where you want to buy. Are you wanting to be close to your investment or be very hands off? Are you looking to invest in an up and coming area which may result in good capital gains over time? Or is a high rental income from day one more important?
We have some useful articles on investment locations which you may find helpful:
How to spot an up and coming property hotspot
Top 10 places to invest in property in the North West 2022
Once you're ready to buy your first rental property, you need to start thinking about how to manage it - or whether you'll get someone to manage it for you. The buy-to-rent legislation is huge and complex, but staying legally compliant is the most important part of being a landlord. By using a rental agent's management services, you can help ensure that you:
Get great tenants for your property who are have been referenced and checked
Receive advice and reminders on buy-to-let property regulations, including: Gas and Electrical Safety Fire, Smoke and Carbon Monoxide Safety Deposit legislation rental rights rules.
Get day to day management and enquiries taken care of
Heaton Group have our own in-house lettings agent, HG Premier Lettings. They offer full management for at a very competitive price, enquire for additional information.
In addition to establishing a good investment location, you also need to consider who your tenants will be. If you are keen to attract families, you should look for larger properties, which may increase your budget but also ensure you get a steady, higher monthly rent. Alternatively, if your investment location is a large student town or has a very young professional workforce, you may want to consider smaller one bedroom apartments.
Looking for more advice? Enquire below to have a no obligation conversation with one of our Property Investment Advisors, or call us on 01942 251945 between 9-5, Monday - Friday.