Buy-to-let investing is a lot of work, and certainly not without risks; but if you know what you’re doing, it can set you on a path to long-term financial freedom.

In this two-part article, join us as we guide you through the process of buy-to-let investment; and uncover a few secrets that even seasoned investors can harness to maximise their returns. 

In part 1, we’ll discuss the benefits of buy-to-let investment, and share tips on how to develop your investing plan and choose the right property to match your goals. 

Later in part 2, we’ll cover strategies for selecting the right financing deal, and how to find and manage tenancies to minimise void periods and maximise rental income.

Let’s get started…

Why buy-to-let? Benefits of investing in buy to let properties

The fundamental advantages that buy-to-let property boasts above other investment asset classes are:

• a steady, relatively passive income stream, 

• long-term capital growth – a rarity for tangible assets, and

• opportunities for diversification within the same asset class.

Unlike stocks or bonds, buy to let properties enable you to charge rent to tenants; providing a regular income stream that can help you build wealth over time. 

You don’t have to wait to start enjoying the rewards of your shiny new investment. As soon as it’s let, the money starts rolling in.

Another benefit of investing in buy to let properties is the potential for long-term capital growth. While tangible assets are often favoured by investors for their simplicity and hands-on aspects, most of them will only ever depreciate in value over the long term.

Property is somewhat unique in the world of tangible investments, in that property prices typically rise over the long term instead; which means that your investment could be worth significantly more in the future. 

This can provide you with a healthy return on your investment when you decide to sell the property.

And finally, every investor should know the importance of diversifying their portfolio. But becoming an expert in a range of different investment disciplines is often a challenge. Even mastering just one can be tricky enough!

Buy-to-let property represents an opportunity to diversify without straying too far from your core competency. 

There’s many different types of property to choose from (‘vanilla’ residential, commercial, mixed-use, HMOs, MUFBs etc.), many different tenant demographics to target (students, young professionals, families, business owners, organisations etc.), and many different geographic regions to consider. 

Each combination comes with its own separate benefits and risk factors. As you grow your portfolio, it’s relatively simple to pick properties which hedge against the weak spots of your current property lineup.

Of course, property investment also comes with its own costs, including maintenance, repairs and – crucially – mortgage interest.

However, by purchasing through an SPV limited company, you can deduct these costs as expenses from your taxable income; reducing your tax liability and maximising your net profit. 

Factors to consider before investing in a buy-to-let property

Before you pull the trigger on a new buy-to-let investment – even if you’re already an experienced investor – it’s vital to ensure you’re making the right decision. 

Any investment purchase needs to not only align with your long-term goals, but also your strategy towards achieving those goals.

Don’t have goals or a strategy? Well, you’re definitely not ready to invest just yet; but the factors below can help you develop one.

First things first, consider your mindset. 

Why are you looking to purchase a buy-to-let? 

Many new investors get into property because they’ve always dreamed of being a landlord or developer, and they feel becoming one is vital to their personal image of themselves. 

Others perhaps feel they’ve spotted a temporary opportunity or gap in the market and the clock is ticking to take advantage of it.

It’s this kind of emotional and ego-driven thinking that can overpower rational decision-making and potentially leave you in financial hot water. 

Other examples of this behaviour include investors holding onto a poorly-performing property asset because they’ve grown personally attached to the property as a living space, or because they don’t want to ‘give up on the dream’ of being a property investor.

Remember, the fundamental goal of buy-to-let property investing is to make money. Make sure you’re not underestimating the risks involved, the work you’ll need to do, and how long you’ll need to hold onto the property in the long run to make a profit.

With that in mind, consider your financial situation. 

Can you afford to invest in a buy-to-let property? For most investors, mortgage lending is the solution to financing their property acquisitions. What sorts of loan options are best suited to your needs?

And it may sound obvious, but be sure to confirm that your monthly rental income – minus maintenance costs and other expenses – will be more than enough to cover the mortgage repayments.

Next, it’s time to start thinking about location. 

Where is the right place to invest? Consider the big picture and the small picture. 

The geographic region or city will play a more general role in the kinds of returns you can expect and how hands-on you can be with your investment.

Meanwhile, the local neighbourhood and its amenities, demographics and job market play a greater role in the desirability of properties, and the kinds of tenants and rental yields you will attract.

What’s the demand like for rental properties in the area? Here’s a quick secret tip for finding out…

Research local listings on property portals and see how long they’ve been on the market. Be sure to also check ‘let agreed’ listings. 

Are properties in the area flying off the shelves, or are there lots of them sitting forgotten on Rightmove and Zoopla? It’s vital to avoid areas where the supply exceeds the demand.

Next, let’s think about the condition of the property you’re after. Do you want to pay a little more for a property that’s ready to let out and start generating cash, or do you want to hunt down a bargain and add value with renovations?

If you’re already eyeing up a particular property (or maybe several), what’s the condition, and how much time, money and effort might be needed to get the most out of it? How much maintenance is it going to need?

The secret to growing your portfolio very quickly

All of the above factors will ultimately affect how quickly you can reach your long-term goals.

With that in mind, here’s a secret strategy that might help you reach them faster. 

Building a buy-to-let portfolio can swallow up a lot of your time. What if you could acquire a whole portfolio of properties all in one go?

Well, you’re in luck. It’s no secret that the buy-to-let market has faced some challenges in recent years. Everyone has their own level of risk tolerance, and some landlords are deciding that they just can’t take the heat. 

If you can connect with a landlord who’s in a hurry to sell off their buy-to-lets, you could potentially negotiate a very good deal on several properties; effectively in one single transaction.

That means gaining multiple revenue streams from multiple properties, all at once.

What’s more, existing portfolios often come already tenanted, so you could save yourself the time, cost and effort of searching for tenants or recruiting letting agents.

Of course, portfolio transfers can come with a whole lot more paperwork than a typical buy-to-let purchase; but a good solicitor can help you work through the legal complexities.

More secrets to buy-to-let success are coming in part 2 of this article! In the meantime, if you’re looking to secure financing for your next buy-to-let purchase, the BTLPlatform can help you analyse the SPV mortgage market and find deals which offer true value for your investing strategy.

Check it out at BTLPlatform.co.uk – and take your first step towards faster, smarter property financing today.