Recent research from the Association of Residential Letting Agents shows that 40 per cent of existing landlords are planning on making more acquisitions during 2008. But, potential landlords should consider many different factors before committing to letting a property. Performing a full risk assessment and being realistic about the finances required to pay for and maintain the property is essential.
Unless you own a property outright, then you need to consider the best way of financing its purchase. Until recently there were thousands of different buy-to-let mortgage products available throughout the UK, but since the credit crunch, many have subsequently been withdrawn. Those that remain have tighter lending criteria and therefore come with quite stringent conditions. Ensure that you shop around before committing to any lender, and don’t settle for the first offer before checking out others. It may also be wise to opt for a fixed rate buy-to-let mortgage as you can plan your expenses for a fixed period with a degree of certainty.
Being able to withstand a period of non-occupation, or non-payers is also an important consideration. If you can only afford to enter the buy-to-let market based on 100% occupancy of the property, then unless you are extremely lucky you will come unstuck at some point. Many experts recommend incorporating an average two months of non-occupancy when calculating your costs. Also, if you are employing a letting or property agent you will need to include their fees in your costs.
Insurance is vital. If you don’t own the property outright, your lender will insist that you have buildings insurance to protect their asset, and similarly you should seriously consider landlord’s insurance to protect you and your investment. That applies especially if you have a portfolio of properties, or if your property is one of a number in the same apartment block where there are other landlords. Indeed, you and your fellow landlords could pool your purchasing power to leverage a better deal from insurers. Buy-to-let insurance is a specialist product and some insurers in that sector offer complimentary add-ons such as tenant referencing services, which are very useful when it comes to assessing potential tenants.
Buy-to-let insurance can also protect you against owner liability claims, and no-one should seriously think about becoming a landlord without being adequately insured – both against liability claims and for protection of property.
Another important consideration is ensuring that you put aside a sum for regular and emergency maintenance. Things will go wrong and it is best to provide for it up front. Having adequate insurance will also help in emergency situations. Older properties generally require more maintenance so consider that before buying.
So, if you are thinking of becoming a landlord, make sure you assess all the risks, do your research and ensure that you are realistic about what to expect.