Guide to buying your first rental property

First Steps
For many people buying rental property can be one of the most secure, easiest and fastest ways to build a large passive income, especially if you have some capital to invest now. There are a number of things you need to think about, including how much of a budget you have, what kind of investment property you want to buy, what kind of neighbourhood you would like to invest in, average rent in that neighbourhood and what kind of return on investment you would like to make.

Once you have set a budget, and decided on what sort of property you would like to purchase, try to stick to this and write down your goals, don't deviate from what you had already decided on unless you have valid reasoning. You also need to think about whether buying to let is a good choice for you, especially after factoring in the extra 3 per cent stamp duty
Financing your property
Before you start looking at properties you should think about how you will finance it, will you buy it outright or do you need a mortgage? How much of a down payment can you make and how will this affect the rates you get on a mortgage? Get a mortgage in principle and arrange to speak to an adviser in person as you will probably not be able to get a booking within the same week.

Start looking at properties 
Some features that are attractive in rental properties are:

  • Proximity to public transportation, shops and parks. In university cities being close to the university is a major positive.
  • Lots of storage
  • Parking
  • Good security
  • Garden

You may be able to get a good deal from people offloading parts of their portfolio, while house shopping I saw a 3 bed house that was currently being renting out room by room for over 1100pcm and it was selling for £75000, which is incredibly high rental yield for the purchase price.
Make use of sites like Rightmove to filter houses in the areas you are interested in with the characteristics you would like, before you arrange a viewing make sure you have all the pertinent information, and call the estate agent if there is anything else you would like to know.

Make an offer
When you are making your offer, if you have a pre-arranged mortgage, make sure the agent and seller are both aware of this as it puts you in a more favourable negotiating position. Evaluate the seller's position from what you know of their reasoning for selling - have they been trying for a long time or are they in a hurry? If they are in a hurry to sell they may be willing to take a lower offer, so its often worth trying a lower offer initially. When you make your offer make it clear that your offer is subject to contract and a satisfactory survey.

Get a survey, and a conveyancer
Once your offer has been accepted it is time to get a survey, and a solicitor, make sure you've put in research to get the best prices, and that you get the right type of survey for your property type. If your survey is satisfactory your solicitor will then begin searches and inquiries, typically requiring a fee to be paid even if they are no close no fee. If everything is in order then you will be called into the office to sign contracts and your time as a landlord can begin!