Here is the theory: to make a success of being a private landlord you need to buy somewhere you can rent out, earning enough money to pay the mortage and running costs. Meanwhile, your investment will grow in value until it delivers you a beautiful, bouncing pension pot.
A combination of low interest rates, high tenant demand and rising property prices mean it is certainly possible to make money from a buy-to-let. But it is no passive investment.
1. Hire a special agent
Properties do not take care of themselves. They have to be maintained, tenants are often demanding and occasionally difficult, plus, as a landlord you need to comply with a long list of health and safety regulations, fire safety laws, deposit protection rules and the recently introduced immigration checks on tenants.
A good letting agent will guide you through the rules and regulations and help you set up the tenancy, as well as find you a tenant and make sure they’ve been credit checked and referenced. The agent will also sort out the paperwork, including the tenancy agreement and deposit protection… and they will charge you a fee for this.
2. Negotiate letting agent fees
Expect to pay about 10 per cent of your rental income for their tenant-find service and up to 20 per cent if you want the agent to manage your property and take care of everyday maintenance. Don’t forget that on top of this fee, you’ll have repair and upkeep costs plus interest payments if the property is mortgaged. As rental yields are only around five per cent in London, that won’t leave you much profit — and when interest rates inevitably go up, you could make a loss.
Make sure your agent is registered with the Association of Residential Letting Agents, and that they offer a redress scheme if things go wrong. Don’t be afraid to negotiate their commission at the outset — they are usually prepared to knock off a couple of percentage points. Note that agents usually charge renewal fees for every year the tenant stays in your property, so include these in your initial negotiations.
Read Full Story: how to run a successful buy-to-let business
A combination of low interest rates, high tenant demand and rising property prices mean it is certainly possible to make money from a buy-to-let. But it is no passive investment.
1. Hire a special agent
Properties do not take care of themselves. They have to be maintained, tenants are often demanding and occasionally difficult, plus, as a landlord you need to comply with a long list of health and safety regulations, fire safety laws, deposit protection rules and the recently introduced immigration checks on tenants.
A good letting agent will guide you through the rules and regulations and help you set up the tenancy, as well as find you a tenant and make sure they’ve been credit checked and referenced. The agent will also sort out the paperwork, including the tenancy agreement and deposit protection… and they will charge you a fee for this.
2. Negotiate letting agent fees
Expect to pay about 10 per cent of your rental income for their tenant-find service and up to 20 per cent if you want the agent to manage your property and take care of everyday maintenance. Don’t forget that on top of this fee, you’ll have repair and upkeep costs plus interest payments if the property is mortgaged. As rental yields are only around five per cent in London, that won’t leave you much profit — and when interest rates inevitably go up, you could make a loss.
Make sure your agent is registered with the Association of Residential Letting Agents, and that they offer a redress scheme if things go wrong. Don’t be afraid to negotiate their commission at the outset — they are usually prepared to knock off a couple of percentage points. Note that agents usually charge renewal fees for every year the tenant stays in your property, so include these in your initial negotiations.
Read Full Story: how to run a successful buy-to-let business
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