Buy to let landlord told to do their sums first

Lettings specialist and investor Graham Bates is warning potential investors to make sure they have their maths right before they consider becoming a buy to let landlord.

Seasoned landlords already understand that return on investment and proper understanding of income yields is very important, but those that are new to the buy to let game may not be quite so well versed. In addition, those that are new to the game may not yet fully understand how important it is to understand these numbers in order to make sure that your buy to let investment is effective.

While most people think that location is the most important part of any property purchase, in reality it is still the math behind a purchase that determines whether or not it is going to be a solid investment. Of course, there are always exceptions, but the long and short of it is that the math is more important than anything else.

The first thing that any new buy to let landlord needs to take a close look at is the gross income yield. This is not as complicated as it sounds to figure out, as all you have to do is divide the annual rent that you think a property is capable of achieving against the total amount that the property is costing you upfront.

Keep in mind that the ultimate cost of a property will include survey, legal fees, stamp duty, and any other additional works costs.

In addition, you need to remember that gross income yields do not figure in any of the day to day costs that come from having a buy to let property. It is only logical to expect that from time to time you will need to make repairs on the property which are also going to cut into your profit.