How to Get the Most Out of Buy to Let

Buy-to-Let is the “classic” property investment strategy, in which an investor buys one or more properties, and then lets them out to tenants to generate a steady income stream.

The goal of Buy to Let should be all about maximising the rental yield, and there are a few things you can do to help with this.

A lot comes down to planning. Have you chosen a suitable property?  Have you bought the property for a price that allows a good return through rent income? Does the property require any refurbishments or repairs, and have you factored this into your costs?

Once the initial planning and preparation is out of the way, and you have purchased your property, there are two ways to optimise your income, and they are through expenses and returns.

Reducing Expenses

It may seem obvious, but it bears repeating. The less money you spend on expenses, the more you’ll have left in the pot.

Expenses can include maintenance and repairs, and other refurbishments. For example, if landlord regulations change, and the building standards legislations become more strict, you may need to carry out work to being the property back into line.

Different types of building will have different maintenance costs, which can be down to age, style, and how well they have been maintained in the past. If you’ve done your homework, this will be a known quantity to you, within reason, and your budget should have enough allowance for this.

Is there a best property type?

Of course, you are limited to the types of property available in the area you are looking to buy in.

While newer properties require less maintenance, as a rule, there are exceptions. New-build flats, for example, come with high service charges and ongoing maintenance funds which can significantly increase your expenses.

Energy efficiency is another potential expense. If your property is inefficient, it doesn’t just increase energy bills. Heating systems will be used more often in cold months, and will tend to require maintenance sooner than a more energy efficient home. Similarly, with air conditioning in the Summer.

Insulation and modern, energy efficient appliances will cost to install, but over time they will save money through reduced maintenance and energy bills.

Maximising Returns

The other side of the coin is what sort of return you can get from your investment. This is fairly simple on the surface – long-term tenants. If you can acquire tenants who are happy in the property, and can afford to remain there for the long-term, then you have a steady income stream.

Short-term tenancies can be a viable option, depending on location and property type, as you can generally charge more for rent. The trade-off, however, is that there will be rental voids between tenants where the property is not making money.

The best way to maximise your return is to let properties that suit long-term tenants.

Ex-council houses, built towards the end of the last century, are a good choice. They will have 2 or 3 bedrooms, good room sizes, and often large gardens, which makes them ideal for families, or couples looking to start a family.

Similarly, there are some large city terraced houses that can serve a similar role.

This type of property will always be in demand, which puts you in a good place when looking to let.

Looking at property size, there are some trends we can follow. Small properties, such as 1 bedroom flats and smaller homes, tend to have a high rate of turnover for tenants. While they may be cheap to acquire, and offer a significant return through rental income, there is a high risk of tenants moving on and the property standing empty for periods of time.

On the other hand, looking at larger properties, you can certainly get higher monthly rentals for more valuable properties, but this is not proportional to the property value. At some point, the property value will be at a point where the costs will take too long to recoup with reasonable rentals.

This leads us to the sweet spot. 2 bedroom homes, large enough for a family on a long-term tenancy, are ideal for buy-to-let purposes. The initial outlay is not too steep, the rental income is substantial, and the reliability of the tenants over the long term is high.

Of course, it’s never as cut and dried as this. There are always other factors to consider, such as location, changing property prices, council tax bands, and many more.

Remember, we’re not here to give you all the answers. This website is to arm you with knowledge, so you can make the best choices based on your circumstances and your goals.

Investing in property, similar to any other form of investment, involves inherent risks. Our website, services, or products do not constitute financial, tax, or legal advice, and should not be relied upon as such. Before making any investment decision based on the content provided on our website, products or services, we strongly advise seeking independent specialist advice from appropriate professional advisors.
Your capital is at risk. The value of your investment can go down as well as up. Historic performance and forecasts are not a reliable indicator of future performance.

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