With demand for rental properties skyrocketing, purchasing a buy-to-let property to use as both a hedge against inflation, and as a multi-source revenue generator is a smart idea. However, in order to ensure you’re making the most of your investment, there are a number of factors you need to consider.

Choosing the right property

With a buy-to-let property, there are multiple paths to generate wealth from it as you’ll be exposed to long-term property growth and consistent rent which will increase with inflation.

However, choosing the right property, as well as the right location, is an essential first step in laying the right foundations to generate returns from your buy-to-let. For example, if you’re looking to own a buy-to-let to use as student accommodation, you’re going to need to consider the various university towns, as well as whether properties provide easy access to the library, student union, or lecture halls. If you plan to let out as an Airbnb then you'd be looking for very different qualities.

If you're mainly looking to increase the property value, think about goals, pick the right strategy and stick to it. For example, finding a property that's being sold below market value, whether that's one you can fix up and let out at a premium or simply finding a seller in need of a quick sale. Or find a location that's up and coming, or where the infrastructure plans make it more attractive. If you are looking for the best buy-to-let locations in London, for example, areas close to the Elizabeth line tube stations are a good example. Maybe you're looking more for security, in which case a flat in central London should yield fairly robust rentals.

While you can search for properties via an estate agent, also consider using Nokkel to unlock off-market properties that could perfectly fit your buy-to-let needs. Perhaps you might uncover an owner who is either looking to sell it quickly or prefers to avoid the estate agent route.

Managing your investment

Once you’ve carried out extensive research, and have purchased your buy-to-let property, you now need to manage your property portfolio.  This means dealing with everything from tax rules, such as the 3% stamp duty surcharge on buy-to-let properties in England, Wales and Northern Ireland, to paying income tax on your entire rental income, regardless of how much you’re paying in mortgage interest.

You will also need to consider how you’ll pay for the fees that come with purchasing and owning a buy-to-let property, from legal fees and survey fees when you first purchase it, all the way through to letting costs, such as unexpected repairs, furniture purchases and fitting the flat out. You also need to consider any ongoing legal requirements such as annual gas safety checks. Combined with the pressures of becoming a landlord including carrying out EPC for any properties you intend to let, this burden might put off some potential buy-to-let owners. However, when done right, it is a sensible, and profitable, investment.

Becoming a landlord

If you want to keep your buy-to-let constantly occupied, being a good landlord, or hiring someone to manage the letting, should be an essential consideration, especially if you have a growing property portfolio.

While you want to avoid the property falling into a void period, you also don’t want to let it to bad tenants who either aren’t going to pay the rent, or could potentially destroy the property.  Carry out full background and credit checks before accepting new tenants to avoid negative situations.  However, also be sure to not overlook urgent issues that need your attention, and always communicate with your tenants if problems are taking longer than expected to fix. Consider how you’re going to keep up with the safety standards, such as fitting fire alarms and carbon monoxide alarms which need to be checked regularly.

If you're a landlord and you don't have a managing agent, you have to consider things like how much time it takes to organise repairs and be on site to let trades in, among other practical aspects.

It's important to consider costs relating to decoration are ongoing, not one-off. If you don't want to have a potential drop in rent, then you have to factor in such as repainting more frequently than you might do in your own home.

Finally, consider whether you would be letting it as furnished or unfurnished - this will likely depend on the demographics you're letting it to. Students and young professionals will probably need furnished accommodation whereas if you're letting it to families they are likely to want it unfurnished.

Yes, there is a lot of admin that goes into owning and managing a buy-to-let property, but doing your research upfront and having the right tenants in place will save you headaches, and most likely, money, in the future.