Buy-To-Let also known as pay-for-itself-property for the unitiated first timer.
The theory is that you buy a property, furnish it and as if by magic it will pay for itself as the rental earnings will cover the mortgage.
Who is to blame? Estate agents who exaggerate the rental potential to get a sale; or rental agents for promising to get six months worth of bookings a year; or even owners who use the property for friends and family in the peak season when they are most likely to get rental clients.....
Regardless of what anyone may tell you, as the ´investor´you must take the necessary steps to ensure that your buy-to-let is a success and not just a financial headache.
Myth: I´ll buy cheap furniture because it will just get ruined
While it would be crazy to spend a fortune on quality furniture, it pays to go for the medium range furniture if you can afford it. Cheaper quality usually means you will have to replace it sooner with no long term cost savings.
Also, the most successful business is built on repeat business and referrals and rentals are no different. The nicer your home looks, the more likely you are to get returning clients.
Myth: I don´t need to use a rental management company
Trying to save money by not using a rental management company could well cost you more money in the long run. Who will keep an eye on the property and let you know if there have been any leaks, breakages or worse robberies?
You also have to consider that if there are any problems with the house you may have to try and co-ordinate builders, plumbers and other tradesmen to have access to the house. How easy do you think that will be when you are in a different country?
Property Management does not necessarily mean using the services of a large expensive company. ´Property Management´means that you have someone - be it a professional company, a friend, cleaner etc. that is willng and able to visit the property on a regular basis, check for any problems, co-ordinate tradesmen and give access to the property for your rental clients.
Myth: I will get enough clients from the English-speaking market
You are missing out on a large share of the rental market if you do not target the Spanish simply because of the language barrier. Use an agency to attract the Spanish clients while you can generate business from English speaking clients with no agency fees.
www.Kyero.com offers free translation of all the core advertising phrases you will need - select all the terms you want to include and click the Translate button at the bottom of the page.
Myth: I can use it for holidays
The peak holiday seasons are exactly the times when you are most likely to get clients, and when you can charge the most for your property rental. If you use it for friends and family or personal use you are unlikely to get much income if any!
Myth: The letting agent will get me all the bookings I need
Even with the best intention in the world, a letting agent is unlikely to be able to get your property rented the whole year round. Not only will there be thousands of properties available for rent in the area, if you live on a large urbanisation you will also have to compete with possibly hundreds of very similar properties.
The only way to maximise your rental income is to run it as a business and that means advertising in as many places as possible.
Myth: I will make xxx amount from the rental
The clients may pay you xxx amount but you then have to pay the cleaner, the gardener, the repair man, the pool man, the rental management company, replace any broken items in the house, credit card booking charges.....
You should estimate that 25% of the rental income will need to go on various costs and charges associated with the rental.
Myth: I will get loads of leads from my website
There is no denying that if you have a decided website for your rental property it will help to sell it better as you can include detailed area information, maps, photographs and other helpful information. However, it is pointless having a website if no-one is going to see it. There are millions of websites advertising rental properties and publishing it means nothing unless you can it to the top of the search engine listings - neither an easy or cheap undertaking.
Use your website as an added tool to make your property stand out from the rest and provide more than just the basic information you are allowed to advertise on rental websites - not as your only advertising option.
And the best one of all...
Myth: The rent will cover the mortgage
You will need time to furnish the property, landscape the garden, get rental clients.....all of which could easily take up to a year during which you will have to cover the mortgage payments.
A realistic estimate is you may be able to let out your property for 12 weeks of the year which leaves a long 40 weeks with no income.
You should not consider a buy-to-let property if you are not able to pay the mortgage without any rental income - this is a bonus!