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  • Stickies & Evergreen

    How to get started in BTL ... in 10 easy steps.

    [Image: 25054826362_a7a7716357_o.png]

    For many people, making the decision to become a landlord is based on the fact that they are concerned about their financial future and/or their pension, and they want to be pro-active in securing a comfortable life/retirement.

    But when initially thinking about getting started, it can seem very daunting to know which steps to take and in what order. But its the same as eating an elephant. The only way to do it is take lots of tiny bites.

    Here are my 10 baby steps to your first investment property.

    1. Questions to ask yourself before becoming a landlord

    It's absolutely vital to understand what is involved in being a landlord, so read my post by clicking on the link above.

    2. Read, read, and read some more.

    There's no rush to buy your first investment property. Keep your powder dry and equip yourself for the journey ahead by reading my "Top 10 must read discussions for novice investors".

    3. Get your ducks in a row.

    Speak to Property Tribes Financial Services to check you are eligible for mortgage finance (if you need it).

    Ensure you have a 25% deposit and acquisition costs ready in your bank account.

    See - Lifecycle of a landlord from a finance perspective

    Appoint a solicitor to act on your behalf. We are happy to recommend Anthony Gold Solicitors, who are experienced and trusted property solicitors.

    You can find the full Property Tribes Landlord and Property Investor "Power Team" recommendations >>> here.

    4. Start close to home.

    Most experienced landlords agree that buying a property within a 10 mile radius of your home is the safest and most comfortable way to start.

    5. Now ... Find the demand BEFORE you create the supply.

    There is no point whatsoever in you purchasing an “investment” and then finding that no one wants to rent it! The term investment implies a “return”, so ensure that there is a demand for the type of property you are thinking of buying. Sounds obvious when you think about it, but I know so many novice investors who came unstuck because they created a supply without finding out if there was actually a demand!

    A few simple ways of doing this:

    i) Post a mock advert on Gumtree and see if your phone starts to ring.

    ii) Contact local lettings agents posing as a Landlord interested in buying property in the area. Ask them if there is a shortage of any type of property on their books.

    iii) Contact local lettings agents posing as a tenant looking to rent the type of property you are thinking of buying. Ask them how many properties they have on their books, if you will need to act quickly because they let fast etc.

    iv) Research the various portals like Zoopla, RightMove, etc. to see how much inventory of any particular property they have up for rent. You should be able to see patterns emerging, such as lots of two bed flats, but only a few one bed flats, or lots of 2 bed houses, but a shortage of larger family homes.

    v) Join Landlord communities like Property Tribes and seek out Landlords who are local to you and ask their advice of the sort of stock you should invest in. Landlords are a friendly bunch and love to chat about property and share strategies, so don’t be shy!

    6. Due diligence, due diligence, due diligence.

    We are all familiar with the famous saying “Location, location, location”, and location is undoubtedly important. However, as the property market enters un-chartered waters, I believe that this should be superceded by “Due diligence, due diligence, due diligence”!







    There is so much information you need to collate about a property to ascertain if it is a suitable purchase … sales comparables, rental comparables, crime statistics, flood risk, noise problems, transport links, local amenities, broadband speed, level of demand in the area, etc etc. My personal due diligence check-list runs to 8 A4 pages.

    Put yourself into the shoes of your prospective tenant. Who are they? A young professional? A young family? What will they want and need?

    Comprehensive guide to property due diligence sites

    Sites for doing due diligence on properties & other landlord due diligence

    Drill down on an area

    21 questions to ask at an investment property viewing

    7. Stack your deals.

    It is imperative that your deal stacks i.e. that you have positive net cash flow at the end of each month. If you don’t, it’s not an asset, it’s a liability and none of us can afford or sustain those types of properties.

    A simple calculation I use to stack my deals is this:

    Monthly rent x 12 divided by ( mortgage product interest rate) divided by (product rental stress – usually 125%).

    A good mortgage broker will help you stack your deals if you are unsure.

    The above calculation will show you the level of borrowing the rent will support, which also gives you an indication of what you should pay for the property i.e. what it is worth to you as a business proposition.

    There is a great discussion about stacking deals >>> here.

    8. Buy at a deep discount.

    It’s risky to pay the market value for a property, so you must ensure you negotiate a significant discount. This locks in equity and protects you (somewhat) from market forces. It is also more likely that you can achieve good cash-flow if you buy significantly below market value.

    Always put your offers in, in writing. You can find a copy of my Offer Letter >>> here.

    An offer in writing demonstrates that you are professional and gives all your contact deals. If your offer is turned down, you may still get a call months later to accept it, because the vendor remembered you and had your contact details!

    You can find my top negotiation tips >>> here.

    The below infographic (courtesy of Agent Media) explains the process of buying a house in the U.K. It is aimed at owner occupiers but the process is the same for BTL:

    [Image: how-to-buy-a-house-in-the-uk-infographic-small.jpg]

    9. Decide whether you are going to self-manage or use a letting agent.

    Self service landlords

    15 questions every landlord should ask prospective tenants

    Landlord toolkit

    If you decide to work with a lettings agent, insure that they are registered with an accredited body like ARLA, NALS, or RICS. This indicates that they are committed to professional standards. Also look for a registered SAFEagent, which shows that the agent has recognised client money protection in place. This should give you and your tenants peace of mind.

    Make sure you tick all of these boxes.

    10. Move in your tenant in.

    This is not the end though. This is just the beginning! Acquiring the property is the easy bit. Now you have to provide a service and run a business. Remember that your tenant is your client and you have to provide a safe and decent place for them to live.

    You have many obligations to your tenant, so make sure you fully understand your responsibilities.

    Visit Property Tribes daily to keep your knowledge up to date and ensure that you remain a compliant landlord!

    [Image: house.png]Important additional reading:

    Top 10 "must read" discussions for novice investors

    The 7 deadly sins of property investment

    Landlord Toolkit - all the contacts and resources you need.

    Top 15 discussions on making money and saving money in property investment
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    Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **5 reasons to get your FREE portfolio review NOW**
    Good helpful list V
    I never realised how much info I have slowly acquired over the years and stored in my brain somewhere
    No wonder I`ve put on weight!
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    Jonathan Clarke. http://www.buytoletmk.com

    Thanks JC.

    I always think back to when we were starting out and it was so daunting to know where to start ..

    So many properties!! Flat or house? Where? How?

    I think this sense of being over-whelmed often stops people taking action.

    "John Moore" - our name for the typical landlord on the U.K. - has a very busy life with kids, cats, dogs, holidays etc. and one thing he does not have a great deal of is free time.

    This guide was created for him to make it easy to get started. Bite-sized chunks and a step by step process will hopefully make it seem less daunting to get going!
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    Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **5 reasons to get your FREE portfolio review NOW**
    Cracking thread Vanessa. As a newbie, I can relate to all your points.

    I would add one more; that is to get a system in place for logging all the costs in and out of the BTL "business" so you keep a clear distinction between the costs for the BTL and your day to day money.
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    Regards Freelancer
    Thanks for that addition Alan and glad you enjoyed the thread.

    All additions welcome, as always. Smile
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    [Image: 4995468760_6be86655d4_t.jpg]
    general operations director (aka Colonel Nicaffi) - propertytribes.com

    I forgot to mention our:

    On-line Landlord Training Course in association with Tessa Shepperson, which is ideal for novice landlords.
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    Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **5 reasons to get your FREE portfolio review NOW**
    Just a general question, out of interest - Is now a good time for people to be getting started in BTL as the governments benefit cap could be a pitfall for inexperienced new landlords?
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    Hi Lily,

    There are increasing numbers of private tenants looking for accommodation in the PRS, and these tenants would not be affected by benefits caps, unless they were made redundant and had to start getting benefits.

    So plenty of private tenants out there, low mortgage rates, and a huge shortage of housing stock are all positive indicators.

    But property is not for everyone so I can only give a generic answer, not one based on your individual situation.
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    Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **5 reasons to get your FREE portfolio review NOW**
    Getting into BTL is always good if you are focused on real demand for rental property.

    If you have a niche strategy (by specific location, type of tenant, etc), then the investment might not make sense. You have to pick the strategies that will work in the market you are focused on or switch markets.

    Detroit investing might be a very bad idea while investing in Phoenix could be very good. When you peel back the details, both cities will have bad areas or good areas in terms of niche investing. The trend lines long term are much better for Phoenix as Detroit in still in decline after 30 years while Phoenix has a growing, diversified economy.

    Think Welsh Valleys vs. London. Or Manchester vs. an underused steel mill community.
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    John Corey

    
Share your questions, learn from mistakes & crowdsource answers to your questions -> http://www.propertyfortress.com/community/
    Follow me on Twitter-> www.twitter.com/john_corey
    My blog -> www.PropertyFortress.com/blog
    RE investing discussions happening monthly in London, 2nd Tuesday of the month -> meetup.com/real-estate-advice
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    Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **5 reasons to get your FREE portfolio review NOW**
    Just joined recently and starting to work through the info - great site.

    I know it may be self-evident, but this is really useful information. I wish I'd had this awareness before starting out a few years back, instead of relying on part-due diligence, part-luck(!)

    Picking up on John's point, a key area of learning for me was the difference not just in regions, but in streets in particular areas. In a certain part of a former mining community, I found two streets that rented at half that of comparable properties only a few hundred yards away. Yet, in the surrounding streets, families and couples were renting privately, and quite happily from what I could tell. Needless to say, I was being offered a property in the 'troubled' section and being told that it could fetch the 'local' rent(!)

    Again, thanks for the info and the site.
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