More of us than ever are putting our money where the mortar is and investing in property. With house prices falling it seems to be a good time to invest. The rewards can be huge but the planning needed also takes some serious dedication. So if you want to build your own buy-to-let property portfolio, here’s a guide to getting started.
Money, Money, Money
Don’t be fooled, buying and selling or buying and letting properties, isn’t as easy as it seems on TV! It isn’t cheap and requires a lot of commitment. You really need to view this as a new business venture rather than a side project.
Firstly you’ll need a lot of money to get started. You can take out a loan to help you with your new buy-to-let venture, but just like ordinary mortgages, there are interest rates. That’s if the bank decided to lend you the money. Banks will need you to work out how much rent you believe you’re likely to make before they give you a loan. You can easily work this out by browsing sites like Zoopla and Rightmove and comparing rental prices in your area. Also, speak to a local letting agent to get some expert advice. Come to the bank with a lot of pre-planning and advice, you’re more likely to be taken seriously. The bank will then see if you can afford the mortgage by looking into your earnings.
You’ll also need money for mortgage fees, stamp duty, valuations, survey and any legal work too. Shop around to find the best loan for you. There are even self-managed super funds, which are similar to loans but have different perks. Borrowing and buying property with your SMSF will help ease the pressure off other costs. Remember you’ll also need to sort out rental contracts and find tenants.
You’ll need to find tenants as soon as possible. This may seem like a simple process, with so many people looking for somewhere to live, but it often isn’t. The longer your house sits empty the more money is going down the drain. Statistics show that the typical so-called rental void is 20 days a year on average. This means you aren’t getting paid for all of this time. Have some backup cash for when your property is empty and try and find long-term tenants.
Where To Buy?
You have to take yourself out of the equation and think business. There’s no point buying a place you want to live in, in an area you love. The key to buying in the right location is working out who lives there. If the demographic is young-professionals or students this will obviously affect your rental prices. If you buy somewhere near great transport links you can afford to charge more. Similarly, you need to be prepared to spend some money sprucing the property up if it’s in a run-down neighbourhood. Do some research about the area you want to buy in. Speak to letting agents and locals to find out some extra information.