Whether you’re planning a one-off purchase or looking to develop a more comprehensive portfolio, embarking on a first buy-to-let property investment can be an exciting and daunting prospect in equal measure. Whatever your aims, taking the time to lay the groundwork for success makes good business sense.
As with all investment strategies, the obvious starting point is to develop a plan. Typically, fledgling investors will map out their desired medium and longer term goals alongside a step-by-step plan for how they’re going to achieve them.
Develop a strategy
If your strategy is long-term, buying to let will enable you to enjoy a steady, regular return via passive income, which you can increase as you build up a more comprehensive portfolio in the future. If your strategy is mid-term, buy to let offers a term of passive income, with the potential for capital gain when you decide to sell. Both market conditions and the personal circumstances of investors will naturally fluctuate over the lifetime of any investment strategy, but considering how you want your portfolio to look in two, five and ten years can focus the mind and give you concrete goals to work towards.
Considering the potential rental yield from your first buy to let acquisition is also crucial. This is calculated by measuring annual rental income against the value of the property and as a rough rule of thumb, around 6% is considered a good gross yield. The nature of the ROI from a first purchase is likely to have a real impact on your appetite for future buying so it pays to make the first move really count.
Location, location, location
The importance of location in property investment really can’t be overplayed. And the vital thing to remember here is that the tenant is the cornerstone of any property investment. Spotting an area that’s on the up and purchasing early can make the difference between acceptable and stellar returns. Get to know your target areas and look for tell-tale signs of growth and gentrification; job creation and tenant demand are key.
Exercise due diligence
Broadly speaking, market research is always essential, not only to locating the right property, but also acquiring it at the right price. There is a wealth of intelligence online, for example the main portals of Rightmove & Zoopla, to help investors research the realistic value of a property in any given area and having this insight to hand will always pay dividends when negotiating the all-important asking price.
As with any investment decision, getting the timing right is key and as much of an art as it is a science. It can be easy to get swept up in the excitement of finding a suitable property, but the most successful investors always take the time to do their due diligence on the current market conditions and area. That said, when you’re confident you have the right property, it pays to move quickly so you can start making that all important return on investment, and potentially planning to fund any further acquisitions.
Focus on funding
Finally, focussing on funding is crucial. Becoming a successful property investor naturally requires access to finance and the swifter and easier it can be arranged, the quicker any new investor will be able to take advantage of favourable market conditions. There are a variety of funding streams available for would-be property investors depending on their individual financial circumstances, including buy to let mortgages and equity release from existing property. Of course, not every solution will be applicable or even possible for all so it is important to do detailed research and seek professional financial advice when appropriate.