Insurance costs can also be significant but are a necessity. A landlord insurance policy will cover the building and its contents, it can include rental protection cover and some policies can cover legal costs in the event of a dispute.
Additional cost considerations include:
- Property upkeep and renovation
- Safety checks
- Marketing costs
These will vary to a greater or lesser degree, depending on where you live or what property you have so it’s important to do your homework and understand what your overall cost scenario looks like. A letting agent is a good place to start to help you understand your investment opportunity.
Lettings agents will also charge a fee but a good agent will provide a service and value that will save you time and money in the long run and help you make your investment as profitable as possible.
What is the property purchase process?
The process of purchasing a buy-to-let is not too dissimilar from buying a property to live in. If you need to finance the investment, you will need to consider a buy-to-let mortgage which tends to have higher charges than a mortgage on a property you live in. Once you have a deposit you will have to go through an affordability check to understand your budget and secure the mortgage. After you have identified a property, the mortgage provider will assess its rental value and any additional work that needs to be completed.
Once you have an offer accepted, you can then start to think about the actual process of letting it out and begin to look ahead to enjoying the benefits of investing in property.
We have many years of experience and expertise in letting property. From finding your first tenant, arranging all the legal paperwork through to ongoing management, we can help you make the smooth transition to becoming a landlord.
Countrywide Mortgage Services can help with finding you the right mortgage. Just click here to find out more.
Expanding your portfolio
Once you have invested in property and started your journey as a landlord, then you may wish to consider developing your business approach. Similar to investing in a stocks portfolio, property in itself can offer a diversified approach if and when you look to expand your property portfolio.
Varied location investing. There is no absolute reason to invest in property close to home; looking at opportunities across a wide area may enable you to take advantage of different yield potentials (rental income measured against the value of the property). This will also spread your risk if one area suffers a dip and helps to smooth out any variations in return.
Varied property types. Investing in a different selection of property types - from family homes to single bedroom apartments allows you to reach a variety of market segments and also protects against changes in demand for different types of property.
Pricing. Consider what mix of property may be best for your budget. Instead of a single property, could you invest in two cheaper properties instead? This could you give you a greater opportunity and again is a way to diversify and reduce your exposure to risk
Current rental market conditions*
Despite challenging economic pressures, property can still present a potentially strong investment opportunity. There are locations and property types that can generate a good yield in the short term and long term capital gains have been a reliable feature of property investments over the years, although this isn’t guaranteed of course.
Demand from tenants for a place to rent continues to grow, with urban locations seeing greater demand than that in rural areas, due to strong employment growth, and new build supply around city centres. Stock shortages mean that rents will continue to rise through 2024, with the supply of rental properties falling by 46% vs the 5-year average. The demand/supply imbalance means that rental value in the UK has increased by 9.7% in the last 12 months with growth spread around the country; rents have risen by 9.0% in London, 10.7% in Wales and 12.9% in Scotland.*
*Statistics from Zoopla UK Rental Market Report December 2023