Two pitfalls of Buy to Let

Today, let's talk about two of the stumbling blocks investors have to navigate when using this strategy:

1. Buying the wrong property

2. Running out of available capital

1. Buying the wrong property:

You have to buy something that you can be confident will let well, both now and in the future. It’s also important that the property will increase in capital value over time at or above the average for the area. If you don’t do enough research, the danger is that you could end up with something that is hard to let, doesn’t achieve the rent you want or need, and becomes a drain on you, emotionally and financially. The best place to start looking for a buy-to-let property is with a good local letting agent. Talk to them and find out what always lets well in the area and what kind of rental property is most likely to achieve the returns you want. Carry out some research online on websites like Private Property and Property24, checking supply, demand and rents in your local area. And don’t be taken in by investment companies and property ‘gurus’ who try to convince you that the best place to pick up an investment is from their catalogue! Simply buy now and we will take care of all the rest! No one cares as much about your money as you do (or should!) so take the time to learn the skills you need to have to manage your money and your portfolio.

2. Running out of available capital:

It’s vital that you budget properly for your buy-to-let investment to make sure you know when bills will need paying and when money will need spending on the property. If you don’t make sure your cash flow is enough to cover all the needed outgoings for the property, you will run into problems. That could mean having to use savings or borrow money to cover bills, or even having to sell the property because you simply can’t afford to keep it.

It’s key to make sure you plan properly before you invest. Plus, assuming you’re intending to hold on to the property for a number of years, only buy a property that generates sufficient rental income to cover its own costs, with enough left over on top to put into a ‘slush fund’ to cover bigger maintenance jobs. Proper prior preparation will prevent a financial nightmare down the line!