Golden Rules of Property Investment

People have been investing in buy-to-let property for years, nothing new there.  For centuries tenants have been renting from landlords, but it’s only been recently that the average ‘man on the street’ has had unprecedented access to finance products to use for investment purposes.  Until the credit crunch bit, lenders were practically falling over themselves to provide buy-to-let finance.

However, since the economic downturn, the cost of buy-to-let finance for lenders has increased dramatically.  Lenders are now reviewing their lending criteria so that only those cream of the crop investors get the best deals.

If you are serious in investing in property and you have the finances to do so, the market is still viable, but you should review our golden rules of property investment before you start.

Research is King

You wouldn’t buy a car without knowing the make, model or mileage and the same principles apply to property.  Even more so!  Research your market thoroughly including the area you are thinking of buying in, any regeneration plans, the local transport links, and also other amenities such as schools and shops.  Any property 10 minutes away from transport and local amenities is a safe bet!

Location, Location, Location

Consider who your ideal tenants would be.  You need high quality locations to attract quality tenants.

How to Buy Well

When purchasing a property, consider content and price.  This could save you money in the long run if white goods and furnishing could be included in the price too.

Make the Numbers Work

Buy a property that supports capital appreciation.  Make sure you include all the costs involved in the property purchase including legal fees, service charges, stamp duty, contingency and ground rent so that you can afford any void periods that occur between tenancies.  Many people ignore these costs and it can be a catastrophic mistake.

Use the Right Advisors

It’s essential that you use good mortgage and letting advisors.  A regulated advisor will ensure you have access to the best deals that are free from any fees and which operate in alignment with your investment plans.  A good letting agent will work to keep void periods to a minimum.

Don’t Expect to Get Rich Quick

Property investment needs to be approached with care and patience.  This is a long-term investment opportunity.

Supply and Demand

Speak to local agents to see what is particularly needed in your chosen area.  This will help you to meet the need and to attract tenants easily.

Head Not Heart

Don’t be ruled by your heart when making decisions.  If you are not going to be living in your investment property you should only furnish and decorate it to a clean and basic standard unless you want to attract high end professionals.  Speak to local agents to understand the quality that is expected.

Avoid the Gimmicks

Be wary of any deals offering incentives, such as no money down for example.  Also, so-called get rich quick schemes should be avoided like the plague.  A few years ago these might have been worth a punt, but not right now.

Keep Pricing Real

Never pay over the odds when purchasing an investment property.  You should never pay up-front fees, finder’s fees or commissions prior to completion.

In summary, your aim should be to find a property that generates long-term wealth.  There are many solid investment opportunities out there for those with the finance available. 
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Room for Rent – How Your Spare Room Could Make You Money

If you’re looking for a little extra income and you don’t mind sharing your home, letting out a room could be a great solution. You could potentially make up to £4,250 from letting out a spare room and what’s more, it’s tax free!

The Government’s Rent-a-Room scheme offers some really great tax advantages and makes it easier to take on tenants. Our guide tells you how to find the right tenant and the type of agreement you should make to ensure everything goes to plan.

Who can let a room out?

Anybody owning a property in the UK who uses it as their primary residence can rent to a tenant under the Rent-a-Room initiative. If you rent your property you may also be eligible depending on the terms of your lease. If you have a mortgage you should check with your lender and home insurance company to ensure you are not contravening any terms or conditions.

What are the advantages and disadvantages of letting out a room?

Of course, the main advantage to letting out a room in your home is money! When you let out a room you do not have to declare the income so long as the total doesn’t exceed £4,250 a year. This means you don’t have to worry about offsetting things such as accountancy services, bills, expenses, or cleaning services against your income.

However, the disadvantages of the Rent-a-Room scheme are also financial. For example, you cannot claim any expenses against the income you receive through the letting. Also, if you receive more than £4,250 per year on total (you may also be charging for meals and laundry services) you will have to declare the additional amount and pay the relevant amount of tax.

Would the scheme work for you?

Before you start advertising a room for rent it’s a good idea to sit down with a piece of paper and work out if the scheme is right for you. Think about how much you are likely to get in rent. You can look around local listings to find out how much the local rent rates are. Also, think about the additional expenses you may incur such as additional charges on your buildings and contents insurance, accountancy fees, and letting agents’ fees if you use one. You utility bills will also increase and you may have to pay for advertising the room. All of these expenses will be deducted from your total income so it is worth working out how much profit you could potentially make before you start.

If your likely income from renting out your room is likely to be in the region of £4,250 with little in the way of expenses then the scheme is a safe bet. If however, your expenses are more likely to be thousands of pounds then you would probably be best to declare the income and pay tax normally.

Finding the Right Tenant

Another VERY important consideration is the tenant. You are going to be sharing your house with a stranger. How does that sit with you? If you are happy to share your kitchen, bathroom and living space with a stranger then you’re ready to proceed. If not, then perhaps it may not be for you unless you can find a friend who needs a room to rent.

Finding a tenant should be pretty easy as there is a big call for rented rooms right now. Advertise in your local paper or on free local listings online. You could also use a letting agent although this will incur a fee.  A tenancy agreement should be drawn up also and you can find templates online or ask your letting agent for assistance with this.

If you have a room in your home that you simply don’t use and that is suitable for letting then this is a great way of making a little extra income.  More and more people in the UK are looking to rent so you should be able to find a suitable tenant very quickly. 
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