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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 landlordIt'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 perspectiveAppoint 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:How to assess tenant demand in an area6. 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 However, as the property market enters un-chartered waters, I believe that this should be superceded by “Due diligence, due diligence, due diligence”!There is so much information you need to collate about a property to ascertain if it is a suitable purchase …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 diligenceDrill down on an area21 questions to ask at an investment property viewing7. 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 the Law Society 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: 9. Decide whether you are going to self-manage or use a letting agent.Self service landlords 15 questions every landlord should ask prospective tenantsLandlord toolkitIf 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!Important additional reading:Top 10 "must read" discussions for novice investorsThe 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
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Jonathan Clarke. http://www.buytoletmk.com
general operations director, site owner and moderator - propertytribes.com
I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.
Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.