As a business idea, buy-to-let properties is one of the top ones up there. There will always be people that are looking for somewhere to live, meaning that there is likely to always be someone looking to live in one of your properties. However, buy-to-let properties can be a challenge for landlords. There have been things in recent years including government intervention, resulting in a declining market. There could even be things going forward for landlords interested in buy-to-let, including changes to legislation and changes in tax, which could all mean problems for landlords looking to make a profit.
Some current landlords may be looking to reduce the number of homes that they look after, or they may even sell off all of the properties in their portfolio. But it doesn’t have to be this way. There are still ways to make a buy-to-let business profitable at the moment, as well as being able to grow the business. If you’re interested to read more and know how this could work for you, then read on.
The right properties
If you are looking to maximize your income through rental properties, is to choose the best properties that are going to suit you. There are definitely some properties that are the ‘right’ properties, and some that are the ‘wrong’ ones. There are some areas of the country where rental is still going well, and rental yields are continuing to rise. Any potential landlords need to think about these areas in order to boost their portfolio. There is no point in getting a property just because the price of it is cheap, which is something that can be tempting to do. Instead, make sure you’re shopping at the right time and in the right market. Then you need to set the right price and find the right tenants willing to pay that price. There are a few things to consider and balance.
The right tenants
If you have had any experience in buy-to-let before, then you will know that having the right tenant can be something that can make or break your letting business. There are different types of homes that can attract different types of tenants, as well as different locations playing a part in that too. If you base your search in a city with a University, then you’re likely to have a lot of demand, but the tenants are likely to not put as much effort into the home as they would if it was their own. This is all well and good, but it should be something to consider, if you want to put your pricing up or deposit accordingly, for example.
Being able to know who your target tenant is will help you to aim to focus on them, and it will avoid major lulls in rental. You don’t want to have too much time without tenants, as this can be hard for business, especially if you are looking to use the rent to pay the mortgage. An example of this is young families. Although there may be some surface damage done if children live there, they are more likely to stay put for longer, once children are in schools. So it can make a difference. You might decide that your target tenant is professionals with a short-term lease of only around six months at a time. This can be fine, as long as contracts are in place.
If you want to have success in any business, but particularly in the buy-to-let business, then being in charge of your finances is a must. One of the costs that can come from being a landlord is using letting agents to manage the properties for you. Ditching this could be a way to be more in control, as this could be something that you manage yourself. You just need to think about how to best run your business and what will help you to stay in control more. While some buy-to-let landlords can face quite a challenging landscape, it isn’t a helpless one at all. If you want to have a property portfolio, or keep what you already have, then it can be done.
Protect your business
Like any business should, you need to protect your business. One of the first things to do is to register the property development or buy-to-let side of things as a business. If it becomes a limited liability company, then as the name describes, means there is limited liability and if financial problems do arise, it won’t impact your personal home or belongings, for example.
Insurance is another must for a property business. Of course, because you own the property, you need to have home insurance. You won’t need to have contents insurance, because the contents won’t be yours, but the shell of the property is yours and will need to be protected. You should also think about getting landlord’s insurance, for all of the things that come along with being a landlord. If a tenant thinks you’re not doing things on time, then they could take legal action. Landlord’s insurance will help to protect you and keep things in place.
Another aspect to think about that you might not have thought about before, is being protected against natural disasters. Not all home insurers will cover things like flood damage or earthquake damage. So if your properties are in areas that are high-risk, then it is worth looking into. If you have a bunch of properties in one area, such as a block of apartments or condos, then you could think about getting a soft story retrofit to help protect the building in case of disaster. You don’t want to put lives at risk, when it comes to the properties that you own.
As you can see, there are plenty of strategies that can be used to help to protect your rental income as a buy-to-let landlord. Planning ahead and making sure that you are prepared and using all tools available, can ensure you have a healthy time to come.