The essence is that most people who make money in buy-to-let hold it for a long time, which means 15 to 20 years or more but it’s important to prioritise.
Is your aim capital growth or rental income?
To be successful at Buy To Let you need strip all emotion from the transaction, which means buy only what makes sense mathematically, often having little or no interaction with the tenants and run your property investment as a business.
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The benefits of investing via an SPV
Are you a property investor or a landlord?
Once you know what you want from your property devise a strategy to achieve that. There are lots of ways to make your investment go further – buying low, selling cheap, Houses in Multiple Occupation (at least three unrelated tenants forming more than one household), short term lets, conversions, property funds etc. By understanding your long-term goals, you can build a strategy around this. If the idea is to add an extra income each month a HMO or short term holiday lets can be very profitable – however managing a them takes lots of time and effort. If your reason for getting into property investment is to reduce your work hours and spend more time with the family, spending all your time looking after tenants in an HMO or tourists on holiday counteracts that.
Calculating your rental yield
The answer for boosting profits is where it always was – in the rental yield. This is one of the best measures of return that you will receive on your investment.
While there are more complex methods of calculating a yield (such as taking into account mortgage costs), in its basic form, all you need is the value of a property and the monthly rent costs.
For example, if a property is worth £120,000 and the monthly rent is £600, then the annual rent is £7,200. To calculate the yield, divide this annual rent by the property value, before multiplying this figure by 100 to turn it into a percentage. In this case, the yield is 6%.
This is a relatively low yield for Glasgow and doesn’t leave much room for profit once the new tax changes are taking into account.
Increasing your rental yield
The answer to increasing this yield is to tip the balance of the above equation by reducing the value of the property and increasing the rent achieved.
In other words, investors need to focus on buy-to-let properties that are cheaper but command higher rents.
In the above example, if the property value is lower – say at £100,000 – and the annual rent stays the same, then the yield is pushed up to a far more impressive 7.2%.
Cheaper properties may not always be most attractive as investments as they typically do not perform strongly in terms of capital growth. However good rents and a high demand area can provide excellent returns in terms of yield.
Examine your investments regularly
The best property investors regularly scrutinise their investments. Looking at whether there are better mortgage deals they can switch to; whether it’s time to release some equity from the property and re-invest; or whether they are running their investment in the most tax-efficient way possible
Successful Buy To Let is about
- Property type
Choose carefully. Get advice from agents who specialise in lettings. We can advise on what type of properties rent well locally, what rental yield you can expect. We pride our service on the experience and expertise we can deliver. If we add value to your business we hope you will recommend us to others.
Buy up, do up, sell up. A different approach if you’ve got an eye for a bargain and the necessary skills you can seek out properties that you could sell on for a decent profit. Often this means taking on a renovation project but if you’ve got an eye for DIY or a good contacts book of trusty traders then you might find this a lucrative way of investing and making a tidy profit without the need to ever deal with a tricky tenant. Here a good agent can help you source, develop and sell utilising their contacts and knowledge to maximise teh best return for your investment.
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What's Your Return on Investment?
- Mortgage Costs
- Look for up and coming areas
- Increase rents
- Minimise Voids
- Holiday Let
- Know your market & tenant demand