For many people, the best form of investment is to put their money into property rather than other options like savings or stocks and shares.
This can be a very profitable route, and it is often considered to be a more secure option for your money, but only if you put it into the right property. It is important to take plenty of time to review your options as well as how long you want to keep your money tied up in the property and what you are aiming to achieve.
Here, Mark Burns, managing director of Pure Investor, takes a look at how to choose the best buy to let property for you, and what you need to think about.
Budget
When buying an investment property, the biggest thing that you will need to consider is how much you have to spend. This will involve looking how much cash you have available and whether you are looking at taking out a mortgage. You also need to consider other costs such as insurance to ensure that any rental yields that you achieve are more than your outgoings. This will help you produce an ultimate budget for your investment, and it is important that you stick to it.
Rental yield
It is important that you know exactly what rental yield you may be able to achieve from your property, which is going to need some homework. You should take the time to research other rental properties of a similar type and in a similar area to gauge what you can expect. You should also watch the market for a whiled to see which properties get snapped up first and which ones seem to hang around for a while.
Potential tenants
When investing in a property, you will probably be doing it with the intention of renting it out to other people, so you should consider what type of tenants you are hoping for. Are you buying a property that is for a family, a young professional couple or students? Once you have a picture in your mind of who you want to have as a tenant, you can then find an appropriate property.
Head not heart
Normally, when you buy a property there will be a certain amount of emotional involvement, but you cannot afford for your heart to get in the way of a business decision when purchasing a buy to let property. Make sure that you plan for your property and stick to it, instead of letting yourself fall in love with something that is less likely to make you money.
Home improvements
If you are looking to rent your property out, then it is important that it reaches certain standards, and you will need to consider whether you need to make improvements to it. This could include fitting a new bathroom or kitchen, installing new carpets or landscaping the garden, so this will all need to be factored into your financial plan.
Property agents
Another thing that you need to take into consideration is who will be in charge of the general maintenance of the property. Some landlords prefer to be hands on and deal with problems and repairs themselves, whilst others choose to use a letting agent who can take away the hassle. This can reduce the stress of renting out a property, but it can also cost more.
Resale
When purchasing a buy to let property, most investors do so with a view to selling it further down the line for a profit. You should have a plan of how long you intend to keep the property and what percentage gain you are hoping to get from it. This means that when choosing your property, you need to find something that will hold its value well, will remain desirable or can be improved to increase the value. Thinking about what a property will sell for before you buy it can help you to make a choice that will bring you the best returns.
Building type
As you look at properties, you should think about what type of building it needs to be. Are you looking at buying a flat – and if so, will there be other charges involved in this? If you are looking at a new build, you need to consider how long it will be before the development is completed and whether the property will suffer an initial drop in value. If you are looking at older properties, it is important to look out for any restrictions that might limit the improvements you can make, such as it being a listed building.
Geography
Your hometown may not be the place that offers good rental yields or property prices so it may be advantageous to look further afield. Cities such as Manchester and Liverpool are attracting investors from all around the country as they offer far better opportunities than some other options that are further south. This will require a lot of research in order for you to get to know these areas better and make the right purchase for you.
Local area
Features and facilities in the local area are particularly important and you need to take these into consideration. For example, if you are looking for a family property, you need to ensure that there are schools in the area with good Ofsted ratings.
Professionals are likely to be looking for good transport links and nearby job opportunities, whilst students will be looking to be close to their universities. Properties that do not tick these boxes with your target market are likely to be overlooked or fail to achieve your desired rental income.
It is vital that you keep in mind that investing in a buy to let property is a business decision, and so your own preferences and desires need to be kept out of it. Create a plan and then make sure that you stick to it, and you will soon be able to find the investment property that is right for you.