Investing in real estate is an excellent way to achieve financial independence. When you become a landlord, you will receive regular cash flow and the opportunity to invest in a property that will appreciate in value in the future.
Do you want to purchase your first investment property? So, read up on all of these points that I believe are critical before investing in a buy-to-let property.
1. KEEP IT SIMPLE for your first purchase!
When you make your first investment purchase, you begin to learn so much about properties you had never heard of before. I frequently hear from newcomers to the property industry who want to buy a five-bedroom terrace house and convert it into an HMO (housing of multiple occupation). Even though the figures appear to be impressive on paper, they are often a massive headache. Next week I will discuss more about HMOS, subscribe to our newsletter so you don't miss that read!
So where can you find a great first time buy?
All I have to say is BUY SAFE! Buying in a safe area that is growing in popularity, such as towns or city centres. When looking at properties, consider what is nearby. Is there easy access to public transportation? Is there anywhere to shop nearby? Is there employment nearby for your prospective tenants? Buying in city centres can be a great investment; depending on where the property is in the city, it may have a high rental demand. If you're not sure how much demand that property might have, I recommend speaking with estate agents in the area and asking lots of questions! Because estate agents are salespeople, they will usually only say positive things; however, if you ask the right questions, you will get the right answers.
2. The rental value
Ideally, you want to earn more than your monthly expenses. If you see a property on Rightmove that you like, please forward it to me and I will provide you with an estimated rental value. Many factors influence rental value, including location and quality both inside and outside the property. Once you've determined the rental value, its time to crunch some figures.
3. Understanding how much of an investment you are putting down
You're either looking for cash flow or a safe asset that will appreciate over time, or you're looking for a combination of the two. So we must consider what monthly costs may arise as well as the initial cost. When calculating monthly expenses, we must consider the following: property insurance, service and ground rent if it is an apartment, maintenance repairs, mortgage repayments (if you borrowed the money), and possibly management fees. Grace Estates offer fully managed properties from 6%. We then compare these monthly costs with how much rent you could receive.
I understand when you are looking for your first buy to let purchase, you have saved up for the deposit. However, there are many other costs to consider.
25% deposit of the property value
mortgage application (EST £500)
stamp duty ( Stamp Duty Calculator - New Updated Stamp Duty Calculations )
legal fees (EST £2000)
refurbishment costs ( does the property need repainting or a new bathroom)
regulation costs (you are required to have Gas and electrical assessments before renting the property etc.)
Once you have found how much the upfront costs will be, are you able to afford to purchase that property? If not, consider waiting until a better property for your situation becomes available.
If you have any further questions on buy to lets, please contact grace@graceestates.co.uk
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