1. Research the market
Whether you are investing in a buy to let property, your first step should be to research the market well. Research the area, and learn the basics of buy to let investments, consider if buy to let investments are suitable for you, and if they are the best way to invest your money.
2. Choose a good location
As with any other type of property investment, your success will greatly depend on your chosen location. You will first have to research the economic, demographic and social situation of the area. Also think about the future of the location. Improving economy, new developments, business investments planned for the future are all positive signs, as they will mean future property appreciation, and a stable property investment. Economic growth also means growing employment levels, and thus a good rental market. You should also consider the stability of the real estate market and the growth potential of rental yields.
3. Think about the needs of your potential tenant
The single most important factor when investing in a buy to let property is to think about your target tenants’ needs. After all, you are not buying the property for you to live in, so try to put yourself in the shoes of the target tenant. Is the property close to local amenities, schools, public transport, central areas and hospitals? Consider the area in general: the overall atmosphere, if it is a developing area, and research the economic situation of the people living there. Especially if you are investing abroad, you should travel there to see the area, or at least ask for advice from people who’ve been there. Also consider if the property is in a suitable condition for letting, and what your target tenant may need.
4. Understand how to make a good profit
You can realistically expect a 12-15% net yield from your buy to let property investment, but only if you choose wisely. The economic recession has resulted in a large number of foreclosures, which means that below market value properties are widely available for investors to purchase. BMV properties can be a very attractive investment option, as the initial purchase price of the property is low, but you can expect a more rapid property appreciation and larger rental yields. While you will need to choose very carefully with BMV properties, and there are some risks involved, they offer great investment opportunities. With long-term rental properties, you will also have to consider expenses like the initial refurbishment, ongoing property taxes and occasional repair expenses. If the rental market is good in your chosen area, you won’t have to worry about your property left without tenants for long periods. Overall, try to aim for the most positive cash flow achievable from your initial investment, and research your available options.
5. Investigate the risks
Before making a property investment, you should always consider the possible pitfalls. Would you be able to continue your investment if house prices fall dramatically? Some risks with buy to let property investments is that the property can stay empty between tenants, which would lower your rental yields, or that major repairs are needed because a tenant damaged your property. By knowing these risks, researching different investment options and choosing your property carefully, you should be able to avoid most of these pitfalls.
6. Think about the future of your investment
When investing in a buy to let property, you should always consider the future of your investment. Can you expect economic growth in your chosen area? How could the rental market be in 10 years’ time? Of course, most of these things are impossible to predict, but you should research your options as thoroughly as possible. You could also consider the future resale potential of the property, which could be a viable and successful exit strategy once property prices have increased.