When the credit crunch hit in 2007, most people thought it was the end of buy-to-let mortgages. However, with interest rates remaining low, and more people renting than ever before, buy-to-let is enjoying a resurgence in popularity.
If you have the money to invest, here’s some tips from Garrett Whitelock a SE London Estate Agent on how to spot a good buy-to-let investment.
Think Like Your Prospective Tenants
When investing in buy-to-let properties, think about what your target tenants will be looking for. Students will want a blank canvas, but they’ll also want it furnished, whereas families will have their own furnishings and will probably want a garden. Create a profile of your ideal tenant, choose a property that suits them, and you’ll reduce the chances of having an empty property.
Location is Everything
You may shudder at the thought of living above a kebab shop, but this isn’t about you. Consider selling points such as proximity to transport, good schools and supermarkets, or whether adding nice décor will offset less attractive features like traffic noise. Central areas have a higher proportion of tenants, and you can pay a lower purchase price for an unattractive property. Avoid run-down areas, as these will attract poor quality tenants.
Look Far and Wide
Don’t restrict yourself to your immediate location. Neighbouring towns, cities, and villages may offer a higher rental yield. Do some online research to determine property and rental prices, and look for areas that have new shopping centres or schools.
Choose Low Maintenance
Every area of the UK has a dominant property style, from the medieval to the ultra-modern. When investing in buy-to-let, the age and style of the building can have a significant impact on your rental yield, so it pays to choose wisely. While you may think newer is better, beware of new build flats with high service charges and high ongoing maintenance costs. Ex-council houses are a good choice as they are solid, were well maintained when owned by the councils, and tend to attract long-term tenants.
If you don’t mind getting your hands dirty, why not consider doing a property up. Tired properties are worth negotiating hard for, as any improvement you add will increase your yield. Before entering into negotiations, research to ensure the final value will be the purchase price, plus cost of work, plus at least 20%.
Calculate Rental Yield
Buy-to-let has its share of millionaire investors, but it’s considered best to invest for long-term income rather than short-term gain. This makes calculating rental yield vital. Yield is the annual rent received as a percentage of the purchase price, with the goal being to pay off the mortgage, or grow your property portfolio. Remember to factor in maintenance costs, agency fees, and tax, as these will all impact upon your return.
Buy-to-let is still a great investment option, as bricks and mortar add a tangibility not found in the share market. With some research and wise choices, buy-to-let remains one of the most sound investments you can make.