How buy-to-let can still be a good investment providing you follow a simple set of rules.

Posted on 27th January 2016 by Jordan Holmes

After it was announced that there will be a 3% increase on stamp duty for people buying a buy-to-let or second home from April 2016, coupled with the new laws requiring all private landlords to check tenants rights to stay in the UK from February 1st, you may be forgiven for thinking that buy-to-let is no longer a viable investment opportunity. However, purchasing property can still be a good investment providing it is done properly.

On a positive note, due to an aging population and a huge increase in inward migration, demand for rental properties is at an all-time high. The increase in demand has consequently resulted in average rents rising to around £743 a month across most of the UK and a massive £1,544 in London. Therefore despite changes in tax and the law, rewards can still be high for private landlords with many opportunities for investment out there.

By following a few simple tips you should be able to get the most out of your investment.

 

1. Location is key

Surveys show that over half of renters choose a property because it is close to where they work. Therefore it is wise to purchase a property near employment centres such a city centres, industrial estates and business parks. Failing this, properties in close proximity to major public transport is desirable. If your target tenants are students ensure you buy within close proximity of local universities and colleges or somewhere public transport is easily accessible. Also take into consideration noise pollution whilst considering location as properties in noisy locations i.e. near nightclubs or bars will be less desirable and therefore demand less rent.

 

2. Consider your desired tenants

Think about who your desired tenants are, whether families with children, students, young professional etc. and base buying decisions around this. Research what your desired tenants look for in a property and tailor you decisions accordingly.

 

3. Size matters

The majority of tenants are only looking for properties with one or two bedrooms. It may seem like a good idea to purchase a large house and turn it into a house in multiple occupation (HMO) by converting rooms into a collection of bedsits/flats. However, due to health and safety rules and the sheer amount of management required on this type of property, it is recommended that this option only be considered by landlords with a great deal of experience.

 

4. Don’t rush into things

Just because purchases made after April 1st will incur an extra 3% charge on stamp duty, DO NOT make any rash decisions. Experts believe that due to high demand over winter, prices have become artificially high and when the new rules come into effect the market is likely to decline with prices falling more than the 3% you would have saved had you bought before April 1st.

 

5. Use letting agencies

Private letting can be very complicated and there is a lot to think about. For example you must ensure you adhere to ever changing health and safety regulations and housing laws. Also with the introduction of the new right-to-rent laws private landlords must check a tenant’s right to be in the UK from February 1st. Those who fail to comply with the new right-to-rent laws can face fines of up to £3,000 per tenant. For a small fee (usually around 8-15% of rental income, tax deductible) letting agents can provide an array of services from collecting rent and managing the property to finding and vetting tenants.

Jordan Holmes

Marketing Executive

My name is Jordan Holmes and I am the Communications and Media Production Lead at iamproperty. I have a BA (Hons) in Marketing and Advertising Management which I obtained from Leeds Metropolitan University. Read more posts from Jordan
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