by Rosie McLean 
As a buy-to-let landlord, you are in the market to make money. But that’s not been easy with the financial pressures of the last year or two. High interest and mortgage rates have impacted investment strategies and left some landlords wondering whether the challenges are worth it.
But, with the right investment strategy there is still money to be made. It just requires that you make decisions wisely to maximise your returns.
Pinpoint the right location to maximise returns
The success of your rental property will rely on local demand. While rental demand is high currently, thanks to buyers forced out of the buying market for the time being at least, that’s likely to change as interest and mortgage rates begin to fall. Look for investment properties in high-demand areas that will deliver high rental yields with a steady stream of rental income, as well as capital growth in the longer term.
Rental supply remains restricted which means that the pressure on rental prices has increased over recent months. Although a rental price ceiling is close, the record returns that can be generated in the current climate remain attractive for landlords.
Manage your finances
This must be counter-balanced with an understanding of the financial implications of a buy-to-let investment, however. This includes your tax obligations, such as the income tax due on your rental income. This is now assessed on your whole income rather than just your profits. You may also be required to pay capital gains tax when you sell so consider the implication of this for the future.
Your mortgage criteria for a buy-to-let property will also be stricter and will be based on higher mortgage rates than for a traditional mortgage. The cost of stamp duty and the impact of interest rates should also be carefully considered. Calculating your return on investment will help to determine the profitability of your buy-to-let investment.
Managing your property
Another decision will be how to manage your property and your obligations to tenants. It requires a clear understanding of your responsibilities as a landlord, the rights of your tenants and local property laws where applicable.
Managing your investment property yourself may save the fees of a managing agent but will eat into your time. Your responsibilities once a tenant is in place include regular inspections and maintenance, as well as managing unexpected issues and repairs. You’ll need both time and money to manage these important elements of your investment to maximise returns.
Be aware of future regulations
When investing in rental property you also need to understand future regulations and how they might impact your business. New legislation such as the Renters’ Rights Bill will shift the balance of power to tenants, with increased rights to stay and to tackle unfair rents among the many changes proposed. Energy performance certificate standards will also be raised under the new government although it hasn’t yet clarified the costs to landlords of this change.
The additional pressures have meant that some landlords are considering selling as a result. Understanding the potential profitability of your buy-to-let business is essential before you consider whether it’s time to expand your property portfolio, stick with what you have or even scale it back.
