Winning strategies for buy-to-let
As interest rates have increased, and may continue to do so in the future, people will become more reluctant to buy their own homes and may choose to rent again. This is good news for investors who own, or who are considering buying buy-to-let properties, as it will put upward pressure on rentals.
Home Services spoke to some of the major banks about their take on the winning strategies for investors in buy-to-let properties. These strategies include what investors should be looking out for to ensure their investments remain sound and how should they assess new investments. Here’s what they had to say.
Nedbank says that investors must never lose sight of the fact that things can go wrong. Investors need to ensure that they have sufficient cash in reserve to cover unforeseen circumstances, which could include a loss of rental income, maintenance costs, repairs, interest rates going up and bad tenants.
There are a number of factors that need to be considered when assessing new investments. The most important is probably that investors should focus on the investment’s suitability as a source of rental income, rather than its potential to deliver a quick capital gain from a short-term rise in the property market. Generally speaking, where you have financed the majority or all of your property investment, you are going to have to make regular monthly contributions until such time as your rental income exceeds your bond repayments and other costs. By focusing on the cash flow first, you will ensure that your investment will break even sooner than it would if you were focusing on capital gains.
ABSA says that prospective investors in the property market should make sure that they buy in an area which will not degenerate over time; they should maintain their properties to the highest standard possible; get reliable tenants; ask realistic rentals and stay in touch with market developments and changes.
In short, buy-to-let is not a quick way to get rich. It is a long-term investment that requires thorough research, careful planning and constant maintenance. But those investors who are willing to play the game for the long haul, will reap the rewards.