(ARTICLE) BUY TO LET BASICS FOR REAL ESTATE BEGINNERS

When it comes to investing in property BUY 2 LET is the foundation of everything in property investing.

So for those who have the intentions of getting onto the property ladder, this article is for you as i’ll be covering all of the basics towards this type of investment.

Why Do People Even Buy Homes?

This is Because we need somewhere to live and sleep at night so this shows that property is something we will always need.

The first type of real estate investing is actually called Flipping

This is when Buy the home,

Then you refurbish it which helps to increase the value

What some people do is that they’ll live in that home for a few years whilst the property value increases and then they sell it at a profit….

This is also known as “flipping”….

When you buy it, refurbish it and then sell it for more.

When You’re Buying To LET

This is when you’re buying a property with the intention that you’re gonna keep the property but not live there yourself

Then rent it out to somebody else where you’ll then be receiving a monthly cash flowing income

In the UK there’s a HUGE demand for people who are looking for homes to rent in…HOWEVER there’s a HUGE shortage of properties available to rent.

So that means there’s a massive demand for a huge lack of supply…

Guess what ...

that then means that the supply must be very valuable because of how high in demand it is.

That’s like how every girl wants a top tier high value man, but guess what? High value men are rare.

So at the most basic level, people need places to live.

You could be the person who provides that place to live, baring in mind that you would not be an asshole landlord, you’re fair to your tenants and would be providing a really good service to people.

But you see, thing is, nowadays, in the UK, Landlords seem to have quite a bad reputation, which for me is really unfair… and that’s extremely biased coming from me because I’m a a landlord myself.

But if you take a step back and really look at the bigger picture. Most landlords use their own money to buy a broken down home and fix It into somewhere someone can stay and sleep comfortably at so they’re actually society a huge favour.

I’m aware of the asshole landlords who are overpricing properties and there’s even some landlords charging RIDICULOUS prices for properties that are terrible shape and of course there’s landlord who are terrible people to their very own tenants.

However this doesn’t mean that EVERY landlord is like this.

You know, with everything in life, there’s good people and there’s asshholes.

How does the decision making process vary when it comes to BUY 2 Let properties?

When you’re getting into property, let’s be honest, you’re wanting something which can deliver you a healthy return on your investment.

And what do I mean by this?

Your strategy has to be BUYING property which delivers MORE than it costs you to own that property

So for example, If I buy a house for £1M in London, which I could rent out for about, maybe £5,000 a month is not really a good option

However,

If I was to get a single family home in somewhere like stoke, crewe, derby or even South Wales for which you can buy for maybe £70,000 then spend another 10k refurbishing it which could then generate £7-900 per month in rent……..so return on your investment is huge.

Location Location Location

When you’re looking for a buy 2 let property some of the things will remain the same.

These are things like desirability of the area, access to local facilities like supermarkets, schools and public transport.

And these play an important factor on WHO are you going to be letting your property to? You need to keep that in mind.

So if you’re letting property to students, you may want to pick a place where students want to live in, this will ideally be properties which are near colleges and University campuses.

If you’re buying to let out the property to professionals, then make sure you pick a property which is near or around an area where these professionals are working, this would ideally be in the middle of the city as that’s where most professional jobs are located.

If you’re buying to let out to a family, then you want to make sure you pick somewhere which has schools nearby as most families want a property which is close to schools so it wont be a nightmare to take their children to school.

So you need consider the location the types of people you intend on renting to.

So the basics of buy to let is to Buy a place, refurbish it and then rent it out…. But there’s a few things to think about in this equation.

The first one is…are you going to be doing the renting out?

What puts of many people for renting out the home themselves is that they say they don’t want to be woken up by cry baby ass tenants in the middle of the night complaining that their boiler has broken......

I’ve had the happen once or twice and its not as scary as you may think……I literally just phoned up a local plumber and the issue was sorted for £100…….so don’t let those stories put you off because its not as scary as you may think.

How Do You Find Tenants?

In my opinion the best way to find tenants is by using a lettings agency. And theirs a few ways they operate.

In some instances they’ll just find you a tenant and they’ll check that tenant out.

So this means the lettings agency will do:

- Background checks on the tenant

- Credit searches

and they’ll also ask the tenant for references to which they’ll then present you with a decent tenant who won’t cause you any headaches.

The LAST thing you want to experience as a landlord is a tenant who refuses to pay rent…

THAT - IS - A - NIGHTMARE….

In the UK you can’t just kick people out overnight if they fail to pay rent…it takes a while before you can actually get them out….so its best you do what you have to in order to get a great tenant who doesn’t cause any headaches.

Lettings agencys are good at find good quality tenants.

The lettings agency will probably charge you 1 months worth of rent for this service and then they’ll setup all the legal agreements and documents and then they’ll walk away.

And whilst I’m still speaking on legal documents, its VERY important that you MAKE sure there is a legal contract between you and the person it is you’re renting the property to…and its VITAL that both sides have this contract for their own security.

And this contract will set out:

- How much they’ll be paying a month

- What your obligations are

- What their obligations are

- What course of action will be if they fail to pay rent

and also the course of action if you as a landlord fail to maintain the property.

OR you could let the lettings agency to care of all the property management responsibilites for an ongoing management fee which is usually about 10 - 15% of the monthly income you receive from the rent payments.

And then YOU won’t have to worry about nothing…..so if anything happens to the property the tenant will call the property manager instead of calling you at 3am in the morning.

Finding Buy To Let Properties

You can find them through

- Local or online state agents

- Poperty auctions

- Leaflets

or by simply word of mouth.

For my final point, there’s a few things to consider before getting into this.

1. Make Sure Your Finances Are In Check.

Because if you don’t have a stable income, then it’ll be hard for these mortgage lenders or the bank to loan you money to buy the property.

You also want to make sure that your credit score is good and that way it can make it easier for the mortgage lenders to loan you the money.

2. I always recommend to buy property outright in full payment

But if you’re someone who wants to pay 50% of your own money and 50% of the borrowed money from the bank to buy the home then its important to remember to have an emergency fund for the mortgage repayments.

If you don’t buy the house in full, make sure you have at least 4-6 months of mortgage expenses.

Why?

Because sometimes a tenant can fall into financial difficulties which will leave you having to pay off the rent for the house to the bank from your own pockets….

The bank needs their money every month and if you fail to pay back borrowed month every month, interests rates will increase the amount you have to repay.

Last year in 2020, soooooo many landlords got caught off guard.

Because they had properties which they didn’t fully pay off, but they had tenants living in.

Then the pandemic came and soo many people lost their jobs meaning some people were even struggling to pay rent

Which then resulted in landlords who had mortgages to pay, not being able to pay the bank for months

Because what some people do is that they’ll use the rent the tenant is paying and then use that rent money to pay the bank…

But if you don’t buy the home in a full payment and then you still need to pay the bank some money and a tenant can’t pay rent, you’ll then have to use your own money to cover those months of rent payment until your tenant gets back on their feet.

This isn’t a bad strategy but Im just putting it out there so that you’re prepared for the unexpected.

So always make sure you have at least 4-6 months of rent saved up just incase shit goes left.

Closing Thoughts

That’s the basics of what you need to understand when it comes to real estate Buy 2 Let.

If you’re a beginner, stay away from property developing. This when you build a home from the ground up.

This isn’t recommended for beginners because you usually need experience, a lot of money and a team of property professionals to be able to make happen.

Till next time.