buying in the right area
or a flat near a hospital. If you plan to
cater for the student market, then the
property will need to have easy access
to the university � again terraced houses
are popular. But if you want to rent out
to the maximum number of students
possible, then you may want to look
at a big property suitable to convert
into a House in Multiple Occupancy
(HMO - see box)."
The key is to keep the client in mind,
and not buy a property because it is the
sort of place you would like to live in
yourself.
"That's a classic mistake that too
many people still make," says Knight.
"A property may appear simply charming
to you, but if it is not easily rentable,
then your buy to let undertaking can be
doomed from the start."
15guide to buy to let
Figure it out
As with any investment decision, it is
vital that you do your maths before
you take any action. And with buy to
let property, that involves making a
number of upfront decisions, which
will define the maximum amount you
will be able to spend on the property
itself. Firstly, will you be marketing and
managing the property yourself, or do
you intend to enrol the services of a
professional lettings agent (see page
22)? A lettings agent can save you a
considerable amount of time and effort,
but can charge up to 17 per cent of the
annual rent for a full management. You
must have money put aside for void
periods when you have no tenants, and
also for maintenance of the property. If
your maintenance budget is small, then
a newer property might make more
sense than an old building, which is
likely to suck up more cash in repairs.
"It is essential that you know what your
means are, and work out the affordability
of the whole project, not just the
mortgage," says Law. "It makes sense
to calculate the figures before you go
househunting, and make sure you stick
to your price limit."
Many househunters end up going
over budget when buying the property
they are going to live in, because they
`fall in love' with their dream home. But
as a buy to let investor, you should stick
rigidly to your budget, and not let your
heart rule your head. As Knight points
out: "buying an investment property is a
business decision, and you should always
approach it as such."
No go areas
Buying off-plan (purchasing a property before it is even built) and snapping up new-
build flats used to be reasonably popular options for speculators, although they have
never accounted for a significant proportion of the UK's total rental property market.
The appeal is obvious: you get a spanking new place which requires no work, usually
in a city centre close to transport links, which you can in theory rent out the day after
you buy it.
In practice, too many blocks of new flats have been built in city centres, and
oversupply has led to a sharp fall in prices. Some speculators now find themselves in
negative equity and unable to rent out their flats.
"While there are no hard and fast rules, at this stage in the cycle new-build flats
are a much higher risk investment than older properties, and most buy to let investors
should probably avoid them," says Bradford & Bingley's Jeremy Law.
do you dig it?
You may need a special licence to rent out a property if it is a House in Multiple
Occupation (HMO). A large student property may typically be an HMO, defined as one
of the following:
lAn entire house or flat let to three or more tenants who form two or more
households and who share a kitchen, bathroom or toilet
lA house that has been converted entirely into bedsits or other non-self-contained
accommodation and that is let to three or more tenants who form two or more
households and who share a kitchen, bathroom or toilet facilities
lA converted house which contains one or more flats that are not wholly self-
contained and that is occupied by three or more tenants who form two or more
households
lA building that is converted entirely into self-contained flats if the conversion did
not meet the standards of the 1991 Buildings Regulations and more than one-third
of the flats are let on short-term tenancies.

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