When it comes to investing money, there’s no such thing as a sure fire winner. Stocks and shares can go up and down and interest rates are lower than low, so it’s hard to know what to do when you have a little extra. I’ve always been a huge subscriber to the mentality of wanting to see where my money is, it makes me feel like I have a little more control over it. With that in mind, one of the things we’ve been looking in to recently is purchasing a second property; either to rent out to long term tenants or as a holiday rental. Here are six questions to ask if you’re considering a buy to let property as your next investment.
Who Is Your Ideal Tenant?
Rather than focussing on what you would look for, try to think about the type of tenants that you want. Are you looking for long term rental or holiday lets? Do you want to attract older individuals or a family with young children? Having an idea of the purpose of the property will give you a more narrowed down ‘shopping list’ when you’re hunting for the property in terms of rooms, layout and even garden space.
What Insurance Do You Have?
Landlords insurance isn’t a legal requirement but most mortgage lenders will require you to have it before you start renting the property out. Not only that but it’s an important way to protect your investment – you wouldn’t buy a house and not have household insurance on it, would you? Landlord insurance is the same but specifically designed to cover buy to let properties meaning you can even get policies that offer coverage for loss of rent or expenses incurred as a result of damage to the property or malicious damage/theft by tenants. Accidents happen, so it’s important that you’re covered.
What Renovation Costs Does It Need?
If you’re buying somewhere ready to rent, you want to make it as appealing as possible to potential tenants. In general that can mean anything from making sure that the flooring is suitable and hardwearing through to the paintwork being a fairly neutral colour. Additionally you’ll need to make sure that the boiler is up to specification and serviced, any electrical items have been signed off and that fire alarms are in and installed. Again, it’s worth thinking about the type of tenant you’re looking for – families with young children or pets may be particularly hard wearing on the floors and walls!
Furnished Or Unfurnished?
If you’re thinking holiday let then you’ll obviously be looking at furnishing the place out fully, whereas a long term rental can be either furnished or unfurnished. Furnished properties can fetch more but they require a greater investment in the first place. For holiday lets, most letting agencies will be able to provide you with a full list of items that you need to provide for people to use – anything from bottle openers through to hairdryers! If you’re furnishing a property for a long term let don’t forget to think about providing plenty of storage, it’s one of the things we hear moans about a lot from our renting friends!
Agency Or Direct?
If you’re looking to let it out, are you going to go through an agency or do you want to let it directly yourself. Agencies do charge fees for their services but remove much of the day to day hassle of being a landlord. They’ll handle finding and vetting tenants, be a point of contact for any issues and will often appoint their own maintenance teams to do any fixes. This can be easier especially if you’re not nearby (or particularly handy) but will add an additional cost to consider. Renting out your property directly may sound like a more cost savvy option but you’ll need to make sure you’re providing tenancy contracts, emergency cover and are able to offer a decent service should something need fixing.
How Much Should You Spend?
As with all things, you need to consider how much you’re prepared to spend on it. It can be difficult to detach yourself from what you would want in your own home but renting is a different ball game. When your tenants move out, there’s every chance that you’ll need to go through and make repairs to paintwork or flooring so you’ll want hard-wearing items that aren’t too costly to replace if they get damaged or marked. For holiday lets, think about heading to somewhere like IKEA to get kitted out – that way if a glass gets broken, you can replace it easily. It’s all about getting that balance; you want the property to be nice enough to get a decent rental value but not at extortionate cost to you each time.