With rents rising and property prices steady, it could be a good time to invest in the buy to let market. According to the financial website, This Is Money, there are many mistakes the landlords can make that can threaten the profitability of their investment, including:
1. Lengthy vacant periods
Whenever a rent property is empty, no income is being received. If your tenants are happy, then they are likely to stay. If the property is badly maintained or there is a sudden large rent increase, then tenants are more likely to leave.
2. Not calculating all costs
The profit on rental income is taxable, and this must be accounted for when calculating the profitability of the investment. Currently there is tax relief on the monthly interest payments on a buy to let commercial mortgage, but from April 2017 this will be reduced to a maximum 20 per cent rate.
There are other costs to evaluate including maintenance, agent fees and insurance.
3. Not vetting tenants
All landlords want good tenants who will pay their rent on time and not damage the property. This requires thorough vetting of tenants, clear rental agreements and following up references.
4. Choosing the wrong location
Though property prices may be cheap in some areas, it may have a bad reputation and not attract quality tenants. It is essential that the right location is chosen.
Buy to let investing can be profitable as long as you do not make these top mistakes.