Is buy-to-let the right investment for you?

2 min Read Published: 27 Nov 2013
buy to let sign
Is buy-to-let right for you?

If you are looking  for a good investment it is likely, sooner or later, that your thoughts will turn to buy-to-let. Rents are still on the increase and with house prices starting to rise again buy-to-let appears to be a viable investment choice. However, before jumping in you need to assess whether buy-to-let is the right investment for you.

Are you in it for the long term?

Buy-to-let is a medium to long term investment, this means that you need to stay invested for a minimum of 5 to 10 years to have a realistic chance of a good return. Buy-to-let is definitely not a 'get rich quick scheme' and can prove very costly if used as a short term investment.

Will you be paying cash or obtaining a mortgage?

If you are intending to fund the purchase of a buy-to-let with a mortgage then this will reduce the return you are likely to make on your investment. Not only will the mortgage payments reduce the monthly return from your investment, it also means that during void periods (when you have no tenant) you will still have to find your mortgage payments without any rental income.

Will you be managing the property yourself or using a letting agent?

If you plan to manage the property yourself then are you prepared to set aside time for the administration required and to be available 24/7 for any maintenance issues? If you are planning to use a letting agent have you factored in fees, they will deduct from your monthly rent?

Are you prepared to do the research necessary in finding the right property?

Not every property in every location is right for a buy-to-let investment. You will need to do your research to find out which type of properties let well, and in what area, together with an estimate of the monthly rental income. Selecting the right property makes a huge difference to your investment return so lengthy research is well worth the time spent.

Are you prepared for the legislation involved in owning a buy-to-let property?

There is legislation involved with owning a buy-to-let property to ensure the protection of your tenants. The legislation covers health and safety requirements, the protection of tenants' deposits and the rights of your tenants whilst in your property.

Are prepared to calculate the tax payable on your investment?

You will be required to pay tax on profits made from your investment and you will have to complete a tax return annually. You could, of course, employ an accountant to do this but paying his fees will eat into your profits

Have you budgeted for all the costs involved in owning a buy-to-let property?

  • maintenance costs for the upkeep of any property, these costs could be quite high if major work is required
  • buying costs such as stamp duty, solicitor's fees
  • insurance premiums
  • costs involved complying with legislation such as annual safety checks
  • costs involve in arranging and repaying a mortgage

Will you need access to your invested funds quickly?

Once you have invested in a buy-to-let property you will not be able to get access to your money very quickly. You will need to serve notice on any tenants, market the property and complete the sale which could take as much as 6-12 months or even longer.

These are the main topics you need to consider carefully before investing in a buy-to-let property. If you still are keen to become a property investor I wish you well.

(image by hyena reality,