How to choose a buy-to-let property
When it comes to choosing a buy-to-let property you need to let your head take over from your heart. This is an investment that needs to appeal to a wide range of people and not necessarily you. It’s fine that you might like chintz and thrive in an area as far away from civilization as possible – but that’s not going to get you many rental customers.
Here’s our top ten tips on what to look for in a buy-to-let investment:
It’s not going to be a good investment if your costs are more than your rental yield. Work out your budget carefully. Skipton International has a handy online calculator to let you know how much you can borrow against the expected rent. Make sure you also factor in insurance, agency fees, the costs of buying etc and have a financial buffer so should your property be empty for a couple of months you have some slack.
2/ Rental yield
This is all important so make sure you do your homework. There are some online resources that can give you an idea of what the market is doing, the Homelet Rental Index is published monthly and can give you an overview. You can also look at what similar properties are renting at in the areas you’re looking in. Look at the quality and style too and notice which are snapped up first.
3/ Research potential tenants
Buying a property in a busy street might not seem like your cup of tea, but it could be more affordable and provide a ready stream of eager renters keen to live somewhere affordable and with easy access. Who is it you would like to rent to? Students, young professionals, families? Then think about what kind of property it is they might like. You also need to check with your mortgage company as there might be restrictive criteria on occupants and property type.
4/ Research the area.
It’s fairly obvious that properties near to good transport links and amenities are likely to get the best rents and always be occupied. You can also take advice from a local letting agent who should be able to tell you what areas are popular and might get the best rents. Look in the local papers at the kinds of properties and what rents they’re getting. There are also plenty of lettings websites for online research if you’re not in the area.
5/ Internal spec.
Having a new modern bathroom suite and kitchen is going to help you rent your property, but having a new modern designer bathroom suite and kitchen which have cost you an arm and a leg is unlikely to benefit you. Prospective tenants want a nice home, but it’s not theirs so they might not look after it as well as you might, and it will take you far longer to recoup your costs. Remember this is an investment and not a labour of love. Put in easy maintainable fixtures and fittings that are clean and functional.
6/ Outside space
Many tenants will like having an outside space, but generally speaking unless you’re renting to Alan Titchmarsh, most people want a small, easily maintainable garden. Again it will depend on your tenants. Young families will obviously appreciate a good garden size, but for students and young professionals having somewhere for a bit of alfresco eating and to sit out in, that doesn’t require weeding and grass cutting every weekend, is likely to be more attractive than a rambling half an acre which will be overgrown and messy within months of moving in.
Maintenance can be expensive. Go for a property that’s easy to spruce up and look nice. Newer buildings are likely to have less costs, but might be more expensive to purchase. A white-washed thatched cottage on a flood plain might seem cheap but it will certainly cost you over time!
8/ Check condition
This is just as important, if not more so, than when you buy your own home. If you rent a sub standard property where for example, the electrics are not safe, then you could be liable. You should also make any repairs straight after buying rather than find half way through a rental contract that the problem has become so acute you need to do the building work immediately. Tenants don’t appreciate being inconvenienced and it is likely to lose you rent if not the tenants.
You might be buying this as a buy to let, but there could come a point when you want to sell your investment. Will you be able to sell it if you need to? Hopefully you won’t need it, but have an exit strategy just in case.
10/ Obligations and legals
Be aware of your obligations. Ensuring gas boilers are serviced to prevent carbon monoxide poisoning, that smoke alarms are fitted etc. This is where having a good letting agent will help as they can advise. Make sure you also have a good Tenancy agreement properly drawn up and don’t forget to check out your tax situation.
Remember this isn’t a get rich quick scheme, owning a buy-to-let is a medium term investment, but it does need to be something that benefits you financially and isn’t stressful so choose wisely and enjoy.