Buy-to-Let Pitfalls by Heather Hilder on August 2, 2015 “Buy-to-let Pitfalls” Buying a property to let isn’t as straightforward as some may think. Buy-to-Let is very different from buying your own home and you need to know the pitfalls. Dinner party topics of conversation frequently revolve around property prices, investment in buy-to-let property for pension purposes, Accidental Landlords, or growing a property portfolio. Yet buying a property for investment purposes is very different from buying a home. There are many hazards to avoid. Our Top Tips for Buy-to-Let Research Buy-to-let can be a legal, practical and financial minefield. You need to do your homework. Research the market, with the help of your local NAEA Propertymark estate and ARLA Propertymark lettings agents. They will be able to advise on demand and any other issues in the area you are considering. Demand Buying where there is no rental demand can be fatal to the buy-to-let investor. Nevertheless it is a surprisingly common mistake. Make sure you are not investing in a market which is already saturated with the sort of property you have to offer. Certainly do not be misled by stories of fast profits. Finances Bear in mind whether you are in the market for capital gain when you sell or simply monthly rental income. This will help you decide what to buy and where, and what kind of mortgage you need. Buy carefully Make sure you buy a property which allows for sufficient profit margin. Do not go for a ‘bargain’ property which may turn into a money pit very quickly. Major repairs require much time and effort and paying more for a property which is in better condition can be a wise move. Decorate to demand Don’t make the mistake of decorating and furnishing the property to your own tastes – keep it simple, with clean lines and do not fall into self indulgence. You are there to make money out of the property, so keep your market in mind. Do not treat it like a doll’s house. Safety Checks By law you must make sure that the property you are letting complies with numerous safety regulations. Be legislation-aware about furniture and furnishings, fire safety, gas safety, electrical equipment safety and smoke detectors. You’ll also need certificates to prove these regulations have been met. Regulations Be aware of new and updated regulations as and when they arise. Failure to comply with the law can result in serious consequences. The best way to make sure you are kept up to date is to use an NAEA/ARLA Propertymark agent who can make you aware of them, while also ensuring you comply. Know your responsibilities You, your letting agent and your tenant have different responsibilities, and it is important to know where these lie. As landlord you will be expected to pay buildings insurance, ground rent and service charges and insure any items you leave in the property. Your letting agent will be able to advise on others’ responsibilities as part of your contract. Voids Your property may be empty and not generate any income for periods of time, and you need to be ready for this. Advertising for new tenants, painting walls and replacing carpets can take months off your lettings calendar and you should have a plan in place for when this happens. Move with the market Know that, if the market softens, you will have to lower your rent in order to stay competitive, no matter how desirable your property. If you are in it for the long term this should not matter, as the important thing is that your property continues to generate a fee for you. Recruit a managing or letting agent Knowing where to advertise your property, how to vet your tenants and the kind of lease you should use can be tricky if you have no experience. As a Landlord, you have a full time responsibility, 365 days a year. It is best not left to friends or family. Instruct an agent affiliated to the NAEA and/or ARLA Propertymark will find tenants, do background checks, draw up the lease, collect rent, and inspect the property, thereby removing much of the hassle involved. Call Callaways for property advice on buy-to-let and how to avoid the pitfalls on 01273 735237 or teamsales@callaways.co.uk.
