If it’s an option you’re exploring, these six tips could help you assess if it’s the right decision for you and help you get started.

1. Research the market

It’s important that you fully understand your investment and how you can expect it to perform.

When it comes to a ‘good’ investment, there’s no single rule that applies to every area. A home that appeals to a young professional will be very different from the one that attracts a growing family. You need to research the type of home that’s in demand in the location where you’re planning to buy, what potential tenants expect and rental values of properties nearby.

As a Buy to Let investor, the good news is you’re in a good position to haggle. You benefit from the same advantage as a first-time buyer in that you’re not part of a chain. As a result, sellers may be willing to accept lower offers in exchange for less chance of the sale falling through.

2. Understand the responsibility of landlords

Becoming a landlord can often be seen as an ‘easy’ way to make some extra money. However, it comes with a lot of responsibilities too.

You have to ensure the property remains in good condition and meets stringent regulations. This can cost both time and money. For instance, gas and electric appliances will need to be tested regularly, fire safety should be considered and any repairs that need completing should be done so in a timely fashion. Failing to comply with regulations could result in hefty fines or legal action.

Rules and regulations change regularly. So, it’s important you stay in the loop.

3. Carefully calculate ongoing expenses

A Buy to Let investment isn’t one that you can manage passively. You will need to be involved in managing a property and it’s important to be aware of the ongoing expenses associated with this. These include repair and maintenance work and landlord insurance.

If you decide you’d like to take a more hands-off approach, a letting agent is an option. However, this too will come at a cost. A letting agent will typically take a portion of the monthly rent as a property management fee. You can often negotiate this or shop around for a better deal. However, keep in mind, that a good letting agent can reduce the chance of void periods (where the property is left empty) and save you money in the long run.

4. Prepare for rental voids

There will be times when the property is vacant or rent isn’t being paid, costing you money. Recognising and preparing for this can help you maximise your investment.

The first step is to fully vet tenants. This can help you minimise the risk of selecting tenants that won’t pay on time. Once you’ve got tenants in the property, treating them well and responding to concerns promptly can improve the chances of them staying long term. It means you reduce admin costs and the periods of rental voids.

In some cases, a letting agent may be a good option for tackling this. They’ll vet potential tenants on your behalf and handle initial enquiries. This, of course, comes at a cost, but if you don’t want to be a hands-on landlord, it’s a useful option.

5. Have a long-term plan

As with any investment, you should purchase a Buy to Let property with a long-term plan in mind. Difficult years and short-term dips can distract you from the bigger picture, and this can certainly be said more recently.

While this can be frustrating in the short term, prices have historically increased in the medium and long term. In fact, the Office for National Statistics confirmed in the UK House Price Index in March 2022 that UK average house prices increased by 0.3% compared to the previous month and have risen by 9.8% compared to the previous year.

However, this isn’t always the case, and you should understand that house prices can fall, as well as increase.

6. Prepare for rising interest rates

It’s been widely reported that in recent years we have enjoyed historically low interest rates, which can be good news for most people paying a mortgage. However, that is beginning to change, with the Bank of England raising interest rates 4 times since December 2021, going from 0.1% in December 2021 rising to 1% in May 2022 . Whilst these are fairly small changes, they could impact your borrowing. Additionally, Buy to Let mortgages generally have higher interest rates than standard mortgages and so even small changes to rates will affect rental yields.

When assessing Buy to Let as an investment, keep in mind that interest rates could rise. Understanding what this would mean for your income can help you create an appropriate buffer if needed. Much like traditional mortgages, you can fix your mortgage interest rate so this outgoing will remain the same.

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this article was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may impact on the accuracy of the article.

Most Buy to Let mortgages are not regulated by the Financial Conduct Authority.

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