tips for landlords to attract rising rents rather than rising damp ; It needs to be a considered process and you need to understand what it entails before jumping in. Becoming a landlord is not as easy as putting your money in the bank – after all, your bank manager won't ring you in the middle of the night asking you to fix the boiler – so you need to be prepared for hassle and hard work.That said, the rental yields can be worth it, particularly if you pick the right area. Knight Frank reported this week that student property could be particularly lucrative, with total returns hitting an average of 13.5pc. However, the national average, according to LSL Property Services, is a more prosaic 4.5pc, which you may not consider worth the stress. Making buy-to-let pay is a mix of research, hard graft and luck – so make sure you've considered the points below before signing on the dotted line.
Know thyself
Not everyone is cut out to be a buy-to-let landlord. Andrew McQueen at Nationwide reckons it will take 15pc of your working time, so you need to have that time to spare, and not resent calls on it. He also suggests that this is an investment decision for those handy around the house. Make a realistic assessment of whether you're ready for the emotional, as well as the financial investment, of buy-to-let. Be sensible about your DIY skills – do you know anyone who will be able to help when everything breaks down, or will you have to rely on emergency tradesmen?
Do the maths
A yield of 13.5pc looks excellent, but a yield of 4.5pc might be less enticing when you consider the work involved. When you are adding up your potential return, consider the amount of return you might have got from cash in the bank, and don't expect stratospheric increases in the value of your investment.
Few economists are expecting a huge rise in property prices in the next few years, so you should be looking at your rental cheque as your return.
Remember there will be other costs – even students expect accommodation to be a good standard now and you will need to cover redecoration and other expenses, such as gas safety checks. If you are letting to large numbers of people who are not a family, you may find that you are hit with extra costly regulation. If you employ a lettings agent, this will also nibble at your return.
Understand the tax issues
One of the reasons for the buy-to-let boom in the first place is that there are some good tax breaks. For example, you can claim your mortgage interest against your rental income, and also some money for wear and tear. Insurance, cleaning and gardening services and commission to letting agents can also be offset against tax.
However, remember that when you come to sell your property you'll be hit with capital gains tax, and even if you have a substantial property portfolio, you won't be eligible for the tax relief other entrepreneurs get when they dispose of a business.
Find the right property
The right buy-to-let property is rarely the same as the right family home for yourself. Make sure you find something in the right area – somewhere near a source of employment or study where large numbers of people rent. Hospitals (despite the current cuts) and universities are obvious examples. Terraced houses with small bedrooms are popular choices, while there has been a glut of city centre flats that has kept the price down. Try to ensure your property is near your home, to avoid lots of time-wasting trips.
Get the right mortgage
There are various buy-to-let mortgages available, most only to those with large deposits. Visit a mortgage broker, since many deals are only available via intermediaries. Since the gap between fixed and variable rates on buy-to-let mortgages is not as wide as with residential, you may want to consider a five-year fixed rate for certainty. The table should give you some ideas.http://www.telegraph.co.uk
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