3 Tips for Buy-To-Let Investors During a Pandemic
The UK economy is officially in recession for the first time since 2009. To make matters worse, we’re also in the thick of a global pandemic.
But it’s not all doom and gloom. In any recession, there are winners and losers and there are opportunities to be had at every point in the property cycle, from the boom period to the crash.
Here are 3 tips for BTL Property Investors to navigate their business during a recession and pandemic…
1. Re-assess your strategy
Is your current strategy viable in the current market? Is it likely to work in the future?
Now is a good time to re-assess and if need be, pivot in another direction.
In general, the rental market can be counter-cyclical to the sales market. If more people cannot afford to buy or are worried about their financial situation, they are more likely to rent.
The most important factor to consider when investing in buy-to-let is the local employment market. Even if there is a high rental demand in a recession, it won’t necessarily push up prices if people are constrained by their finances.
This is currently the case as many tenants are unable to pay their rent due to being out of work during the pandemic and unemployment is expected to spike towards the end of 2020 as the furlough scheme comes to an end.
When choosing an investment property, it’s best to focus on high-growth areas, think about the future, seek out the highest rental yields, and always consider the wants and needs of your tenant. Opportunities with the least risk and the highest potential for long-term success are ideal.
Large university towns and areas with high employment are likely to provide more stable income than those that have been affected badly by the lockdown.
2. Continue to invest further
While a recession can cause many investors to sell up or put the breaks on their investments, if you’ve got the funds available to purchase property, now could be a great time to secure a good deal and grow your portfolio further – especially if you want to take advantage of the stamp duty holiday.
There are many property owners trying to unload properties that they can no longer maintain or afford, and while this means you could scoop up a bargain, it’s crucial you don’t skip the necessary due diligence.
Investors should be on the lookout for red flags and question why the property is up for sale in the first place such as; a lack of income, poor location, lack of maintenance or significant work required.
Before jumping into what seems like a great deal, get a detailed inspection and do thorough due diligence on the property and local market to gauge the property’s short- and long-term potential.
3. Secure the correct funding
The right finance solution can make or break your investment so it’s crucial the numbers stack up.
One thing borrowers need right now is some certainty and a more solid understanding of precisely what funding is going to be available to them. That’s something LendInvest are trying to provide through the launch of their new Appetite Statements for landlords.
The new Appetite Statement is a pre-agreed limit of what LendInvest would be willing to lend to the borrower based on specific parameters, allowing BTL investors to source investment opportunities with the benefit of a shorter underwriting process upon application.
This means investors have a clearer idea of what they might be approved for before applying, which speeds up the application process and provides the necessary funds quicker.