Top tips: Investing in a buy-to-let property

The popularity of buy-to-let properties over the years has fluctuated in line with borrowing costs and interest rates. Interest rates, however, have remained low, leading to consistent growth of buy-to-let properties and investors wanting to get on the property ladder.

Another factor to consider when thinking of buy-to-let in 2022 is the amount required for the deposit. You will need at least 25 percent for a buy-to-let mortgage, and to get better mortgage deals you should aim to secure a deposit of around 30 percent. Buy-to-let can be a good way to generate income whilst also investing for the future – but it can involve a lot of work, it can be risky, and it isn’t easy money by any means.

These top tips can come in handy while navigating into the buy-to-let market:

1.              Opt for a property with good potential and is in an area that provides a suitable environment with a range of all the basic amenities.

2.              Be sure of the tenant's demands. A studio apartment that lures a young professional differs from a single-family home suitable for the growing family.

3.              While doing your research, consider the capital growth and the initial return on capital.

4.              Don't just barge in any bank for a mortgage. The minimum deposit to secure buy-to-let property is usually around 20%-30% depending on the broker. In addition, the tax and extra stamp duty can end up eating into your return, so don't forget to factor in these elements when working out your return on investment. Instead, talk through independent brokers to help you weigh up your options and lock in the most lucrative deal. 

5.              If you have a good building team in place or contractors that you know are reliable, considering run-down properties is always a good idea, especially if you can secure them under market value.

6.              All buy-let-let properties must be ‘stress tested’ which means your lender will determine what they believe the monthly rental price will be. Always be conservative with your figures and ensure you do your due diligence. Some lenders have already increased their stress test margin to 145% rental cover.

7.              Take out landlord's insurance and building insurance just in case of a mishap.

8.              Responding to tenant's concerns swiftly can minimise the risk for rental voids.

If you are thinking of investing in a buy-to-let or want advice in property management or property development, contact us today.

Our contact details:

Office: +44 (0) 203 005 5269

Email: info@mestatesltd.co.uk