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How to buy a rental property

Buying a rental property (Buy-to-Let) can be a good investment if you’re looking to make some money on the side, or even supplement your income. However, it’s important to do your research before making any decisions and getting into debt. Here are some tips for buying a rental property:

Choose an area that you’re comfortable with.

  • Choose an area that you’re comfortable with. You don’t have to buy a property in an up-and-coming neighborhood, but it’s important to choose somewhere that’s within your comfort zone. If you’re not familiar with the area, it’s easy to get overwhelmed by the process of buying a rental property and end up making bad decisions.
  • Choose an area with good transport links. It doesn’t matter whether the transport links are buses or trains or simply good roads—you want to be able to get around easily and quickly so that tenants can easily find their way there too!
  • Choose an area with good schools nearby if possible (this will help attract more tenants). Schools are very important when choosing where one might live: children need somewhere safe and secure where they can go after school until their parents return home from work each day!

Research the market.

  • You should do your research and know where the rental market is.
  • Know what other areas have in terms of rental rates and vacancy rates, as well as how they’ve been affected by economic conditions or other factors that could affect your area’s rental market.

Get a good deal on a mortgage.

Make sure you get a good deal on a mortgage. Most people’s first stop when looking for a new home is their bank, but if you’re going to buy a rental property, this might not be the best idea. Banks have their own lending policies and interest rates which means you may miss out on potentially lower interest rates elsewhere. In fact, some lenders will even suggest that borrowers overpay by an additional amount in order to boost their chances of getting approved (which means using up more of your savings after you have just put down a 25% deposit on a buy-to-let mortgage application). Instead of relying on banks, consider using a mortgage broker. If you are looking for an independent mortgage broker, we suggest visiting www.unbiased.co.uk

Do your sums.

Renting out a home is a business, and like any other business, you need to make sure you can afford it. To start with, the main things to consider: is the rental yield of the property. Here’s how we did our sums…

  • We researched average market rents for similar properties to ours in our area and what other people were charging for them (this is known as ‘benchmarking’). This gave us an idea of what we could expect to receive from a tenant.
  • Calculate your gross rental yield and net rental yield

Gross Rental Yield

1. Sum up your total annual rent that you would charge a tenant. 2. Divide your annual rent by the value of the property. 3. Multiply that figure by 100 to get the percentage of your gross rental yield.

Net Rental Yield

  1. Sum up your total annual rent that you would charge a tenant
  2. Sum up the annual fees and expenses of owning the property
  3. Subtract the total annual expenses from the total annual rent
  4. Divide  it by the value of the property
  5. Multiply by 100

Budget for costs.

Another important factor to consider is costs. While the purchase price and mortgage interest are obvious expenses, there are others that can quickly add up: property tax, insurance, maintenance and repairs, letting agent fees, and legal fees. However, some costs can be offset against tax such as letting agent fees. If a property needs some work before it’s ready for rent, be prepared to spend some money on renovations or improvements.

Conclusion

We hope that this post has given you a good idea of what to look out for when buying a rental property, and how to go about it. If you’re thinking of getting into the rental market, but are unsure where to start, get in touch with us today!

About Bridge Letting

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Bridge Letting is a letting agent and property management company with a solid background in rental property and customer service. We cover all aspects of the letting process and provide a full management service to property owners throughout Edinburgh, Dundee, Perth & Fife. Our fees are simple and transparent – We offer a Tenant-Find, Let-Only & Property Management Service

Landlords, if you would like a no-obligation, free rent appraisal of your rental property please don’t hesitate to contact us today! Find us on Facebook, Instagram, Twitter & Google Business We would love to know what you think of our latest article, drop us a message at info@bridgeletting.co.uk

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