Property investors all over the globe are getting in on the buy-to-let investment method. But you shouldn’t assume that success is guaranteed when you go down this road! If you want to take your first steps into this business, read this amazing guide first.
Know how much it will cost you
This isn’t some get-rich-quick scheme, my friend. This type of investment always comes with pretty steep upfront costs. Of course, those initial costs are part and parcel of what can make this such a lucrative area of investment. But you need to have a thorough and exhaustive idea of what costs you’re going to incur. Using agents, mortgage lenders and lawyers is going to cost you, of course. Buying the property is the most obvious cost, but you’ll also need to consider the cost of “fixing it up” to your satisfaction!
Don’t go crazy with the borrowing!
So, you’ve spent some time with some price projections and a calculator. Surprise, surprise! You find it’s going to cost you quite a lot. If you don’t have the capital already, you will, of course, be tempted to borrow the money you need. Of course, I’m not going to tell you that taking out a loan is always a bad idea. But you need to be careful about it. After all, you’ll need to pay back that loan on a monthly basis. If you’re not careful with your planning, you may have to pay back more per month than you’d reasonably make through rent payments. Big mistake!
Consider working with experts
The chances are that you’re not an expert at this kind of thing. After all, you’re reading a “beginner’s guide” to buy-to-let investments! That’s not meant to insult you, of course. But it is something you need to take into consideration as you go down this road. You could make some really good profit if you play your cards right. Taking on too much of this task by yourself could see you waste such a chance. So consider working with real estate experts if you want to increase your buy to let investment potential.
Capital growth versus rental yield
“What versus what?” I hear you ask. Here’s the thing about buy-to-let investment that you need to decide upon: are you looking for a long-term investment or a shorter one? This is a simpler way of asking if you want your property to provide high capital growth or high rental yield. It’s important that you understand the two terms - so this section gets a bonus paragraph!
Capital growth is the long-term focus. It’s how much the value of the property increases when compared to the amount you originally paid for it. Rental yield is the short- to medium-term focus. This is the income that you make from the rent every year. The reason you need to choose a focus on one over the other is because the properties that give the highest of one will not give you the highest of the other. If you need to know why exactly that is, you can read about it in more detail here.