Property letting pitfalls to watch out for

f you want to have an exciting retirement with plenty of cash to live your dreams, your working life is going to be spent either building your pension or an investment portfolio. We all know the state pension probably won’t even cover your biscuit bill by the time you quit work for good. And building a pension is a race against time or a struggle to find money (if you don’t have one you’ll need the other). That’s why many people turn to building an investment portfolio. And for some that means entering the property letting game. Buy-to-lets are popular because we understand them. After all, most people who do this normally already have a home. They’ve been through the traumas of house ownership and have a pretty good idea what awaits them. Compared to the potential massive ups and downs of playing the stock market, you can see the appeal. And property letting is kind of sexy. There are loads of exciting TV programmes aimed at it… you can’t imagine Kirsty and Phil presenting Invest Invest Invest, running up and down the country to meet stock brokers and examine bull and bear markets. Over the last decade or so, the housing market has been the place to make cash. Everyone’s either made a few thousand themselves, or knows someone whose house price doubled in a few years. The reality is that putting your pension money into bricks and mortar has its challenges too. Property letting is not something you should go into without a great deal of thought, as it’s not necessarily easy to back out of (think how hard it can be to sell your main home– sometimes it’s worse with an investment property). Five interest rate rises since August may have killed the days of being able to buy any old house and make a profit on it. Yes, many believe interest rates will drop soon, but they are unlikely to reach the lows of a year ago. The reality is that in property letting, it’s only the investors who do a lot of research and pick their deals carefully who make money, and set themselves up with a nice golden egg for the future. The key seems to be getting into buy-to-let as a long-term investment. It’s hard to find a house, do it up, and flog it straight on for tens of thousands of pounds profit. Instead you’re better off finding a property that will be easy to rent, so you can attempt to cover its monthly expenses. Your property letting profit will come in five or ten years when you sell up. The kind of research you need to do is simple but will take time. Check out the area and look at why someone is moving out of the property. Is it really to buy a bigger house, or are they fed up being burgled? You might think that’s not important as you won’t actually be living in the house, but you’ll soon find it hard to get tenants, especially if the area is developing a reputation for crime. Ask estate agents about the state of the local property market and read the local newspaper. Tell agents you want to see properties in a state of disrepair or with 1970s décor. Yes these will take time and money to renovate, but property letting is a long-term game. Finally, whatever you do, don’t forget the most important piece of research: a full survey. You wouldn’t sink £100,000 into shares of a company without ensuring its foundations are solid; your property investment should be the same.

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