Investing in property for buy-to-let?
Important considerations when choosing an investment property
So many factors involved in choosing a profitable investment property are different from choosing your own home. The fact is, you don’t even have to like the look of the place because, after all, you’re not going to be living there.
Therefore it doesn’t need to appeal to you aesthetically, or sentimentally- it may even be papered throughout with woodchip, or be painted in a colour scheme which makes your eyes water. That doesn’t matter, because woodchip does come of…..eventually, with a steamer and lots of sweat and swearing, and then you can paint the whole place magnolia.
Investment, investment, investment:
No- investment has to be the mind set when you are working your way through a bewildering catalogue of possible buy-to-let properties: which one is going to generate the best rental yield for you?
So what factors are going to point the way to the best investment property?
Well, because this is purely a financial decision it’s important to take the rental yield as being factor number one. To calculate this, you’re going to need to know how much rent the property can generate for you over a year as a percentage of the amount of money invested in the property.
In order to calculate a realistic monthly rental figure for a possible buy to let investment, have a search online for similar properties in the same area and see what their rentals are: your prospective property will rent for about the same.
Keeping it real
It’s easy to fall into a trap of thinking that you could generate a higher rental if you install a super fancy bathroom or a sparkly new kitchen with granite worktops: these will certainly help you to rent the property out more quickly, but are unlikely to significantly increase the amount of rental your investment property will generate.
However, what they will do, is increase your investment, thereby decreasing your rental yield- not what you want.
Do a thorough condition check
So let’s say that you’ve found a property where the numbers seem to be looking good: in other words, the rental yield is looking at least 8% or more. Good!
Next you’ll need to be having a thorough check of the condition of the property, because this will feed into your possible investment figure. If you’re going to have to spend a shedload of cash on making the property safe, habitable and attractive to potential clients, then that’s obviously going to change your calculations.
Get that boiler checked- it could be a ticking time bomb! (Or at least, hold the potential to cost you a bomb.)
Be realistic when you’re calculating possible costs for works that need to be done- and always bear in mind where you’re going to need to bring in the professionals for any electrical or plumbing works. Check out the boiler!! This can be a really expensive repair or replacement job- and make sure the wiring is fine, too. You’re going to want to be seeing paperwork to prove that the place is a fit and safe place for your prospective tenants to live.
Avoid trying to save money by expecting your prospective tenants to put up with crumby bathrooms and kitchens, as you will be likely to discover that this is a false economy and will actually cost you more money down the line.
Good tenants are worth the investment
Why? Well, because, first of all it’s likely to take longer to let out, and will therefore be standing vacant for longer ( costing you money) and secondly because tenants with low expectations can also frequently be the ones who cost you money: don’t have high expectations of people who have low expectations- it just doesn’t work.
Ok, we’re not talking bespoke kitchens here, and lots of marble in the bathroom, but the tenants you want to attract need to be the sort of people who will take pride in your place and look after it. They’re more likely to stay longer, cost you less in repairs, and pay their rent regularly because they appreciate the fact that you’ve provided them with a comfortable home.
Do the maths….
So you need to do the figures: if the place needs a new bathroom and kitchen, new wiring and plumbing, carpets…decorating…double glazing….new roofing- then is it really going to be the buy to let investment property you’re looking for? If not, don’t try to juggle the numbers by scrimping- just move on, as there are always other properties on the market.
You want decent tenants? Decent tenants want to live in decent areas. If you don’t know the city particularly well, ask the local property experts: we know which areas are desirable to prospective tenants and which are best avoided. Even if a property may present itself as being a potential bargain, then you really need to investigate thoroughly why that could be.
This is another major consideration when choosing an investment property as a buy to let. You may find a gorgeous cottage in a rural village but check out the transport and you may find that the bus service into town for shopping or work is sporadic or even non-existent, and then you immediately rule out all but the two-car families; which could cross many good potential tenants straight off your list.
On the other hand, if your potential investment property is on a regular ‘bus route, or close to a station, or within easy reach of the motorway and other major roads, then that’s definitely a plus point in its favour. Your tenants are going to be thinking about their journey to work, and if you can make it convenient for them- great!
It’s also really important to consider what parking is available at the property: at the very least you want to find a place with on street parking outside. Beware of property close to the local school- the streets may be quiet and empty at eleven a.m. when you view the property, but by 3pm you could have a whole streetful of parents in cars; sitting in your convenient on street parking place outside your prospective property!
- Location: is it in a good area with high demand for rental properties?
- Price: after any works, is this property still a good investment?
- Transport links: it is easy to get around from the property by car or public transport?
- Parking: can you park close to the property?
Is the answer a resounding ‘Yes!’ to all of the above questions? You may well have found your investment property- well done!!
…..alright, so there are mossy gnomes fishing in the front garden and rainbow-glittered unicorn wallpaper on the back bedroom walls- well, you just can’t have everything in this world, you really should know that by now.