How To Come Out On top With Buy-To-Let

Buy-to-let property is considered a relatively low-risk investment and one that outperforms returns offered by other asset classes in the long-term. At Platinum Property Partners (PPP), we love that there is a uniqueness about investing in property that you don’t see with other types of investments. Property can give you an income, capital appreciation and a tangible legacy that you can leave to your loved ones.

Crash and Earn

However, as with any investment, there are still certain risks that all landlords should consider and prepare for. To name but a few:

● Property-market crash
● Interest-rate rises
● Rising costs
● Poor demand

We’ve seen it before, in the early 1990s and then again in 2007. A property-market crash will cause a dramatic drop in house values that often results in negative equity for many homeowners and investors. This makes selling property a problem, especially when the mortgage is larger than the value.

Interest-rate fluctuations are inevitable, as well as variations in landlord costs – just take lettings agency and maintenance fees, for example. Not to mention the additional stamp duty for landlords that came into effect last year. And what if nobody wants to rent or buy your property at the right price? You’d find yourself with an investment that will lose you money.

There is however a relatively simple way you can reduce these risks and still earn money on your property during difficult times.

How Can You Protect Yourself?

The most important mitigation against any risk is to do extensive research before making your move. Buy-to-let property appeals to many would-be investors, but as our research shows, the majority of landlords don’t set out to become landlords. They become landlords through chance, and therefore don’t understand the market very well.

Understanding the sector from the outset, will help you to avoid scenarios such as investing in locations or properties where tenant demand is low, voids are high and rental yields are unattractive.

A high level of cash flow is important in risk management. Ensuring properties are achieving as much rental income as possible will provide a buffer against rising costs, whether that’s an interest-rate rise or an unexpected void period. It’s also important not to or over-leverage. If you do, you’ll be risking any added protection you may need during a property-market crash.

What Could Possibly Go Wrong?

Scenario planning is absolutely key. Ask yourself what could go wrong and what you could do to prevent it. At what point will your investment break even and how likely is that to happen? If you are planning to sell, either because you want to or have to, are market conditions working in your favour?

As business magnate Warren Buffett once said, “Risk comes from not knowing what you’re doing”. Luckily, Platinum Property Partners are experts in their field and will help you reduce your risks.

By following PPP’s tried-and-tested system, buy-to-let investors have protected themselves against market fluctuations, plus the other risks outlined above. Even during the latest financial crisis, their properties were still making a profit when many other buy-to-let investors were making a loss.

If you're interested in finding out more about what we do, then please feel free to contact us at info@platinumpartners.co.uk or give us a call on 01202  652101.