Following the rise in stamp duty and reduction in tax relief on commercial mortgage interest payments, it may not seem the right time to invest in the buy-to-let market. However, Pete Muggleston, writing for EveryInvestor.co.uk in March 2017, argues that buy-to-let investing can be profitable provided that wise and adequate planning goes into the decision.
Muggleston advises that the first key to successful investing is to choose the right area. The ideal place to invest has good transport links, and is one where house prices are rising.
The next factor to consider is the type of tenants you want to attract, because this will affect your business plan. Families will tend to stay longer than young professionals. If you are looking for higher yields, student housing is better, but tenancy agreements will be shorter and there could be higher maintenance costs.
One of the main issues that Muggleston says affects the profitability of buy-to-let investments is having long periods when there are no tenants. You can take out rent guarantee insurance to cover short-term vacancies, but investors should make sure they have enough finance so that vacant periods do not threaten the buy-to-let business.
Landlords also need to factor in possible increases in interest rates and generate enough rent to cover any likely rises.
Lastly, Muggleston recommends buying repossessed property for investors starting out. They can be bought at relatively low cost at auction, and although many require interior refurbishment, they can be a great investment opportunity.