If you own a single-let property that is sitting idly, you can put it to good use through the buy to let business model.
Buy to let investment – In layman’s term
There are various ways to diversify your property portfolio. You can invest in a Rent-To- Rent where a letting agent will rent the property out as HMOs or Service Accommodations.
Alternatively, you can also diversify your portfolio by letting your own properties as HMOs or Service Accommodations as a landlord.
When you invest in purchasing a property to let it out to a short or long-term tenant, it is called Buy to Let investment
There are three major buy to let investment strategy:
- HMOs (House of Multiple Occupants)
- SAs (Service Accommodations)
- Long-Term Lets (Residential)
We will be focussing primarily on Buy-To-SAs.
How can you get started with buy to let business
The Buy To Let business model depends on you being a property owner. But if you want to get into this business and are looking to purchase properties you need to keep the following things in mind:
The purpose of your purchase:
If you are getting into the Serviced Accommodation business, you will have to find apartments that are in the city center, well connected to other parts of the city, other facilities based on your target audience, etc. You can read here How to find the perfect property for Service Accommodations!
Find how you are going to fund the purchase, through a B2L mortgage or through paying the full amount as cash.
The condition of the property:
If your property is in a dilapidated condition, you must refurbish it to attract your target customers, thus increasing its value.
The next step is to set up a SA. You can either do it yourself or you can hire a letting agent to do run the business for you.
A letting agent will market the SA for you, find tenants, pay your rent every month. However, you will have to spend some money to pay the letting agent for their services.
If you are planning to run the B2SA yourself, you can market your services on websites like Booking.com and Airbnb, Facebook Groups, or through your website and get tenants.
You should be ready to answer every call regarding any issue with the apartment at all times of the day and have contingency plans in place.
If you have funded the SA using a B2L mortgage, you will have to make sure the rental income exceeds the monthly mortgage payment, for you to pay for the maintenance/services, letting agent, and keep the remaining yield for yourself.
If you are a first-time B2L investor, it is advisable to have outside help from an experienced person in the field.
You can beat the fear of the unknown by having an elaborate plan and contingency system in place for every issue that might occur every step of the way, as this will help you be more prepared to face any problem.
In theory, this seems like an easy enough plan, but it takes a lot of hard work and patience before you can see good results. So, take it one day at a time!