Five tips to help struggling buy-to-let investors

Nobody is going to help landlords, so you need to help yourself!

It's been a pretty torrid two years in the buy-to-let market. That said, last week saw some relatively positive signs with the Council of Mortgage Lenders saying arrears had improved significantly and the decline in new lending has started to slow.

But let's face it, you know we are in dire straits when the fact that lending has only dropped by 4% in the last quarter is cause for celebration.

No one can pretend it's been an easy ride on the buy-to-let bandwagon, but those investors that jumped on early have fared better than most, tending to have greater equity in their properties and better access to remortgage options.

It's the buy-to-let borrowers who entered the market more recently and borrowed to the max that have the biggest problems. Many are now in negative equity (or low positive equity) and find it impossible to remortgage in the current environment without 25% equity.

But house prices are not going to suddenly rocket and drag all these borrowers out of negative equity.

Lenders are certainly not going to help landlords by relaxing their criteria to allow them to refinance at more competitive rates. Many specialist buy-to-let lenders have disappeared from the market altogether and those who remain are lending very cautiously indeed.

And finally, the Government is not in any rush to help landlords -- in fact over the last few years it has introduced a raft of rules and regulations to make their lives even tougher. Its recent announcement of the creation of a National Landlord Register, for example, will do little to help those struggling through a sea of red tape.

Frankly, if you are a landlord who wants a more successful investment, you are going to have to help yourself.

But how?

1) Get the right tenants

Getting the right tenants in the first place is half the battle, as you can avoid so many potential problems with a little extra caution at the start.

Of course, a personal recommendation is your best bet, but don't let this prevent you from properly checking any tenants' references as well. This is absolutely essential and a credit check is also highly recommended. If you need to employ a letting agent for finding tenants and vetting them, do so. It may cost you initially, but it could save you a lot of money in the long run.

2) Drop your rent for long-term tenants

Obviously you need to be able to afford your mortgage repayments and the numbers need to stack up, but within those confines don't be unwilling to drop your rent in exchange for getting a tenant to sign up for longer.

The peace of mind you will get for signing up a tenant for 12 months rather than six could easily be worth a discount on the rent. A tenant is also far more likely to want to stay on at the end of the contract if they feel they are getting a good deal.

3) Talk to your council

If you are finding it difficult to find tenants, talk to your council.  If you are happy to let out your property to social housing tenants you could find they have a range of suitable schemes and many have guarantees in place to maintain the current standard of your property.

Private Sector Leasing, for example, is where the local authority will use private sector properties as temporary accommodation for those in priority housing need. The local authority will make an agreement with a landlord to lease his/her property for a fixed period of time (normally five years) at slightly below market rates and then use it to house people, often just for a few weeks, while permanent accommodation is found for them.

Social lettings schemes are where local authorities act as a letting agent for landlords, offering a part or full management service. Or they can simply advertise your property in their receptions or on their website. 

Many councils offer Landlord Accreditation Schemes where you can be accredited to provide your property to social housing tenants, providing it is up to certain standards. The council will offer you help and advice with this.

4) Exit your investment

It may not be the ideal situation but if you are in arrears on your repayments, struggling to find tenants, or the rent you can achieve will not cover your mortgage payments, consider selling the property.

Although this may not appeal, if you'll make money or break even it is definitely a good option. Even if you'll make a small loss, consider whether this is worthwhile in order to prevent yourself falling further into debt. If you have a portfolio of properties, selling one could ease the pressure across your portfolio. Sometimes the tough option is the right one.

5) Get the most competitive mortgage

Who wouldn't want to get the most competitive mortgage for their needs? But remember that the buy-to-let mortgage market has changed dramatically in the last two years, perhaps since you last refinanced.

It could be that those lenders you didn't consider competitive in the past now provide the most attractive products. Your best bet is to speak to a mortgage adviser, as the majority of buy-to-let lenders are currently only operating through intermediaries.

Below are some of my favourite buy-to-let mortgages:

Fixed rates

Variable rates

So follow these tips to ensure you become a better buy-to-letter! Good luck!

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