Reducing the Risks of Buy to Let

Buy to Let investing is often underestimated; people think they can just remortgage, buy a second home and pay off the mortgage by renting it out. This works fine until the professional bad tenant comes to stay. There are many people in the UK who take advantage of the legal system, and stay in properties for a pittance while the landlord is legally forced to maintain the property and can't evict.

These tenants make buy to let investments very dangerous, because instead of making money from property investment, buy to let victims end up losing thousands - some have even lost their homes. There are many other ways that Buy to Let property investment can turn sour, but thank fully there are ways to minimise the risk.

Treat it as a Business

When you buy a property to rent it out, you are buying a property and starting a lettings business. This is the only way to think about it. Ideally you should write a business plan as well. A business plan makes you put down on paper how your business is going to succeed, so you can easily see down the line if it is/isn't living up to your expectations.

Use as little leverage as possible

As with any business the more you borrow (leverage) the higher the risk. A high percentage of failed businesses fail because they over-leverage. Ideally in a property investment buy to let the investor will borrow no more than 50% of the property's value.

Consider using a management agency

This is another reason why it is a good idea to write a business plan, but as you will see from the many other guides on this site, there is loads of research and planning to succeed in investment Buy to Let style, so make sure this is considered at some point. You need to think about whether you are going to have time to manage the business, to advertise, find tenants, do viewings, collect rent and everything else. If not you will need to factor in the cost of an agency when calculating buy to let return on investment (search buy to let investment calculator).

Diversification

One of life's truest proverbs is: don't put all your eggs in one basket. In Buy to Let investment this means buying in different locations to spread risk. This can mean buying in different cities, regions, or countries.

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*This page is provided for information purposes only and should not be construed as offering advice. Flex Profit Hub is not licensed to give financial advice and all information provided by Flex Profit Hub regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.