If you’re thinking about entering the buy-to-let market or perhaps expanding your existing property portfolio, identifying the perfect investment will be the key to making sure it is money well spent.
While there are a myriad of things to consider and we would always recommend speaking to a local lettings expert first, here are three essential tips to get you thinking…
Where to invest?
Now this is of course an obvious place to begin but it is by far and away the most important starting consideration when choosing a property to let to tenants.
By looking at average property prices and average rents in a specific area, you will be able to work out a rough yield – the property’s annual rental income expressed as a percentage of the investment. We’ve looked more closely at yields in the past and you can read all about them here.
Investing in a location where property is cheap will provide a better yield on paper. However, it may not always be as simple as that.
You need to think about the type of tenants you’re targeting. Are there good local amenities and local schools? Is the area well connected? Are average crime rates low? If the area is unattractive to potential tenants it is likely to take longer to get your property occupied, meaning it will take longer before you can start earning.
Are tenants interested?
Once you’ve pinpointed your location, with a good prospective yield, you then need to take a closer look at the hyper-local rental market to determine whether it is worth investing in this area.
Is there a high proportion of privately rented property here already? Are there lots of available properties to let? A bit of detailed research can provide some of the answers to these questions and a local letting agent will be able to give you a good idea of current tenant demand.
If there aren’t many prospective tenants around or there’s a glut of available properties on the rental market, no matter how attractive you previously determined it to be, this area may not be right for buy-to-let investment at this stage.
How’s the condition?
Once you’re happy with the location and the local rental market, it’s time to think about the property itself in more depth. What sort of state is it in? Will it need large scale renovation or is it ready to take tenants right away?
This is where a professional survey could come in very handy – identifying any potential problems that could cost you in the long-term.
We’re not saying that a property that needs a bit of work is necessarily a bad investment but you will have to factor in these costs when looking at your potential yields and profits.
If you choose to renovate and invest some money into the property you must make sure it has a positive impact on the property’s rental value and is desirable for your target tenant market.
Well there you have our three tips for starters, there is of course a whole raft of things to think about before making your purchase. If you consider these points carefully, though, they may just help you to pick a profitable investment.
Some of the other things you need to consider are whether the property is freehold or leasehold, whether it’s energy efficient and how much of your budget you will have left for additional costs.
If you require further advice about entering the buy-to-let market or expanding your property portfolio, here at Letting Solutions we would be delighted to help. You can contact us on: 01506 496006.
What’s more, our free online property valuation tool can give you a good idea of how much a given property could make in monthly rents – a significant part of your initial research.