This post is also available in: English
Buy-to-let is an attractive income investment in a time of low rates and stock market volatility.
But beware of the low-interest rates. One day they must rise and you need to know that your investment can stand that test. Many investors who bought in the boom years struggled as mortgage rates rose before being slashed to the lowest rates. Interest rates will rise again!
Nevertheless, despite the potential for interest rates to rise, the current lower house prices, rising rents and improving bond deals are tempting investors once more.
If you are considering investing in property in 2020 or improving your returns on a buy-to-let you already own, it’s important to do things right. Like any investment, buy-to-let comes with no guarantees, but for those who have more faith in bricks and mortar than stocks and shares, here is some advice to get you on your way.
Location, location, location
It doesn’t matter how many times you have heard it before: location remains the most important factor when buying property. When you are buying for investment, you have to look out for locations that have high rental demand.
Don’t be over-ambitious
We have all read the stories about buy-to-let millionaires and their portfolios. But the days of double-digit house price rises are gone.
To compare different property values, calculate their yield: the annual net income (gross income received fewer expenses) divided by the purchase price, and multiplied by 100 to get a percentage.
If you can acquire a rental return that is substantially more than the bond payments, you can start saving to re-invest. Remember though that people rarely buy a property outright – and property comes with running costs, so bond costs and, agents’ fees must be worked out and they will eat into your return.
Think about your target tenant
Instead of imagining whether you would like to live in your investment property, put yourself in the shoes of your target tenant. Who are they and what do they want? If they are students, the unit needs to be easy to clean and comfortable but not luxurious. If they are young professionals, it should be modern and stylish but not overbearing. If it is a family, they will have plenty of their own belongings and need a blank canvas.
Remember that allowing tenants to make their mark on a property, such as painting, hanging pictures or taking out unwanted furniture, makes it feel more like home. These tenants will stay for longer, which is great news for a landlord.
Hotel Room Investments Offer Better Returns
Hotels are a ‘going concern’ business with proven track records, positive online reviews, documented revenue histories, and growth plans. These elements are not just good from a customer satisfaction point of view but also help to instill investor confidence.