What Buy-to-Let investors need to plan for
There are a lot of things that can and will change over the lifetime of your property investment. You need to know what will impact you so that you can plan ahead and make sure your Buy-to-Let is always legal and as profitable as it can be.
Five key things that you need to keep on top of:
1. Interest rate changes.
If rates go up, you must make sure that your rental income still covers your costs and you are in a position to be able to re-mortgage and switch to another rate, if necessary.
You might have a rate of around 3% at the moment, but the average for 2000-2015 was between 5% and 7%, so check your figures and see whether your Buy-to-Let is still profitable at these rates.
2. Property prices.
Although property has always increased in value over time, the market does naturally experience peaks and troughs and there has been the occasional crash (in the last recession, average prices fell by around 18%), so if you do not have enough equity in your property, you may not be able to re-mortgage or sell when you want or need to. Be careful not to over-gear yourself.
3. Bad tenants.
No matter how carefully you reference and credit check tenants, it is likely that in your time as a landlord, one or two bad ones will slip through the net.
They may stop paying rent, indulge in anti-social behaviour or damage your property, so you must be prepared and able to act quickly if this happens.
Make sure that you have appropriate property and rent insurance and that you know when and how to begin eviction proceedings, legally.
4. Emergency solutions.
Plumbing & heating systems can break down and storms etc. can damage your property and make it uninhabitable. Make sure you have contractors that will respond to emergency callouts and that your insurance covers not only damage to the property but also the cost of temporarily re-housing tenants.
5. Changes in the law.
If you use a self-regulated managing agent who is either RICs, ARLA or NALs members, they should keep you updated and effect any changes, as necessary, but if you manage yourself, you must make sure you have a way of being alerted to new legislation. Join either the RLA or NLA and/or your local landlords’ association to stay up to date.
Owning a Buy-to-Let property is as much responsibility as running your own business and it is essential you mitigate the risks associated with investing in property.
For more help and advice on how to finance Buy-to-Let for good times and bad, do call or email our Buy-to-Let finance experts.