What are the common mistakes you need to avoid with your next BTL?

19 April 2021 | Investment

To assist investors – Salboy, which says it sells a lot of properties directly and is in constant conversation with its clients – has come up with nine property marketing tricks that investors need to consider.

The firm believes this part of the market is underexposed and not discussed enough and, with this in mind, is keen to raise awareness and educate its clients (as well as other investors).

The company is especially keen to highlight the tactic of guarantees and unrealistic yields being thrown round in often unpredictable, volatile markets. For example, some agents and developers may quote 12% yields when the city centre average is 6%, Salboy says.

Below are shortened version of the tips. You can find the full checklist here.

1. Get rich quick

Beware of property gurus promising overnight success without any money. You always need capital to invest in property.

2. Unrealistic Rental Yields (%)

Yield are easily exaggerated and it’s essential to look beyond yield alone and consider return on Investment (ROI).

3. Guarantees

The FCA regulates the ‘guaranteed’ rents and returns. There is a legal requirement for companies to comply with offering these. Yet many still do without complaining.

4. ‘Assured’ Returns

Assured rents are often bundled in the property price of new-builds and can exaggerate the yields available on that scheme which may impact finance availability.

5. Short-term strategies

Be aware of new investment strategies like short-term lets, hotel rooms and HMO’s. Not all have the same level of risk and many face increase restrictions.

6. Overpromising

Many property investments exaggerate or over promise. Do your own research and due diligence into this developers track record and reputation.

7. Below Market Value

Cheaper properties are not always the best option. Raising the question, why is the property distressed and the seller willing to give up the profit? Is it really BMV?

8. Tenant profile

Every tenant is different – some require more time to managed, more stress, increased void periods and possible increased wear and tear. Consider what your return on time invested will be?

9. Options for exit

What is the resale market like for this kind of investment? Is it mortgageable? Some property investments have great yields in the first 5 years but limited options or no options for exit.

Avoid getting caught out – Do your own research!

Make sure you buy a property that fits your own investment strategy, not a strategy that fits the training or property that you’re being sold. Do your own research and get educated.

Create a long-term strategy based on return on investment

Instead of focusing on yields, have an investment strategy built around ROI. That can help determine if a property investment is a good investment option. Consider whether you want a short, medium or long-term investment strategy.

Invest with a trusted property developer

When investing in off-plan, it’s key to buy from experienced property developers with a proven track record. Look through their portfolio and visit built-out developments or current projects being constructed.

In short, work with a transparent and honest property developer with a solid track record for delivery, invest in traditional buy-to-let properties in high growth locations, and concentrate on premium investments that are proven to offer long-term ROI.

“Salboy is committed to delivering quality developments that people want to live in,” Simon Ismail, co-founder and managing director at Salboy, said. “Proper environments we are proud to put our name against. We don’t need to rely on sales and marketing tricks, because anyone who visits any of our developments that we’ve completed in the last 12 months will see for themselves the quality of finish and why our developments prove so popular with renters and owner-occupiers.”

Benjamin Ashcroft, head of marketing at Salboy, argues that education is key to the firm’s consultation process.

“As a developer, our in-house investment consultants have a long-term relationship with our client, not just closing a deal. That’s why so many of our clients go on to repeat invest with us. Our customer experience is vital to our success, and promoting developments candidly and honestly, is key to that. Because the traditional buy-to-let investments still offer excellent returns, and the last 12 months have proven that.”

This post has originally been featured in Property Investor Today.