With so much hype surrounding the whole buy-to-let market at present, it can be easy to dismiss the whole investment vehicle as being too good to be true. However, is that really the case? While reports in the media concentrate on the ultra successes, what about everyone else? Can anyone make money through buy-to-let?
Knowing what’s involved
One of the biggest dangers for those who are new to buy-to-let investments is the misconception that they can make easy money. While it is undoubtedly true that there is still plenty of money to be made in the UK property market, believing that it is easy is a sure fire way to become quickly disappointed and disillusioned.
You need to be serious about your investment and willing to put both time and effort into making it work – it isn’t simply a case of buying somewhere and then kicking back. Unfortunately, there’s a lot more to it than that. So, if you’re ready, let’s take a look at what’s involved.
Selecting the right type of property for your investment
First of all, you have to assess your own situation before you can take the plunge into the buy-to-let market. What do you want from your investment? Do you want capital growth that will possibly be used as a retirement nest egg later in life? Or would you prefer to receive a regular monthly income from the property?
Making this decision is essential, as the days of receiving both from a property investment have been waning ever since the financial crisis hit back in 2007. It’s not impossible, but it certainly has become a lot more difficult to find a property that delivers both, so you need to make the right choice for your circumstances before you buy.
Know your numbers
First time property investors can easily get sucked into things like aesthetics when choosing a property to invest in, but it really all comes down to one thing – numbers. Overpaying for a property simply because you fall in love with a feature is not good business, so you need to be aware of this if you want to make real money from the property market.
Knowing what your budget is also means calculating your monthly living expenses and working out whether or not you can cover any unexpected costs that may occur. For example, could you cover the mortgage should the property be left empty for a couple of months? If the answer is no, you might want to reconsider your position before you put down that deposit.
To manage or not?
Another consideration is how hands on you want to be when it comes to managing the property. Many people opt for having a management company to look after their buy-to-let investment rather than have the hassle of phone calls at inconvenient hours about a broken boiler or having to chase tenants for unpaid rent. However, this privilege costs money, and it could eat into your profits fairly quickly if you are operating on tight margins.
It’s another thing to think about as it can really make all the difference between making money, breaking even or, heaven forbid, having to put your own money in to cover the shortfall yourself.
Can you really make money with buy-to-let? Definitely, but it won’t be as easy as you may think and only serious investors should take the plunge. However, that being said, if you are willing to put in the effort necessary to make it work, the rewards can be fantastic. Providing you have done your research, know your limitations and have a keen eye for a bargain, there are still plenty of decent opportunities out there.
And remember, those opportunities can be found anywhere, from the next street along, to the next county, or maybe even in another country altogether. Keep an open mind and be prepared to put a little effort in and your dreams of being the next buy-to-let baron might just come true!
If you enjoyed this blog post then perhaps you might like to read “5 Ways To Spot An Up-And-Coming Area“