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Rental Property Investment Advice Coming into 2016



When investing in property for buy-to-let opportunities, investors should be wary of low, attractive interest rates that may rise and put their investments to severe tests. Many investors who before prospered before the financial crisis of the Great Recession struggled afterwards when mortgage rates rose and property values fell.

Despite these ever-present dangers, low property purchase prices, increased rental market demand, rising rent levels, and mortgage conditions favourable for the moment tempt investors again. This apparently primrose path, however, can be hazardous, and it is well to be aware of its risks. I spoke with TheMoveChannel.com who had some great advice for us. This is what they told us.

Commitments and Assumptions

Investing in buy-to-let commits thousands of pounds to a property and assumes a mortgage obligation. When house prices rise, they leverage gains above the mortgage debt, but when they fall the mortgage remains unaffected.

Buy-to-Let Math

The main mathematical variables are the property purchase price and the rent it is likely to get tenants to pay. Lenders typically want rent to cover 125 percent of monthly mortgage repayments. The best buy-to-let mortgage rates require large arrangement fees. Having calculated likely monthly mortgage and rent estimates, it is then wise to be conservative in assessing investment prospects.
What if the property remains vacant for several months? Such undesirable developments are not uncommon and must be considered in planning buy-to-let ventures.

Shop Around for a Mortgage

Potential investors should scout the buy-to-let mortgage market efficiently by checking lender websites for current rates, terms, and conditions. They should not for mere convenience limit their mortgage quests to banks or building societies where they already do business or maintain accounts. For advice they may consult with buy-to-let mortgage brokers, keeping in mind that mere consultation creates no obligation to use their services.

Target the Tenant

Instead of wondering whether the investment property would satisfy their own personal wants and needs, investors should consider the situations of their target tenants and what they want and need. If students, the property should be durable, comfortable, and easy to maintain but certainly neither lavish nor luxurious. For a family with plenty of personal belongings, only basic appliances, a stove and a refrigerator, suffice.

Tenant Default Insurance

Insurance against tenant failure to pay rent, rent guarantee insurance, is available in standalone policies or as provisions of property insurance coverage.

Consider Distant and Distressed Properties

Most investors look for buy-to-let properties nearby, but the best investment opportunities may not be close to where they live. Properties nearby are easy to manage personally, but this fact is no advantage if an agent is involved. Investors should cast wide nets and look at areas with large potential tenant populations.

Properties in need of rehabilitation or renovation also may be worth consideration. If hard negotiation gets a bargain purchase price, the investor can realize a good return by making repairs and enhancements that add value.

Haggle over price

Buy-to-let investors have the same advantage as have first-time buyers in negotiating discounts. If not under pressure to sell a property to buy another, their position as not part of a chain at risk of a sale failing to close is relatively strong when negotiating for discounts. They should make low but reasonable offers and not be persuaded into overpaying.