Want to invest in your future and unlock a new revenue stream as you draw closer to retirement age? Property is the way to go. Though the market can be turbulent, there is no other investment opportunity in the UK that comes close to the property market for returns.
According to a recent survey, one in three millennials will never be able to afford to buy their own home, and as such, demand in the rental sector is increasing year-on-year. When you buy a property, you’re effectively purchasing a future income stream with limitless potential.
However, you can’t just buy any old property. Below, we’ve put together some of the things you should take into consideration before you hand over the cash for your next buy-to-let…
Let’s start with an obvious one. It’s so easy to spot a bargain and snap up a buy-to-let, only to realise the market in your local area is oversaturated. Check property agent websites to see how long properties go unclaimed and Zoopla for local property insights before buying.
Look for the worst property in the best street. You can always install a new bathroom and give your property a lick of paint, but you can’t improve the neighbourhood or its image.
Buying a property that’s been on the market for a long time? Ask why. Good investors will only buy properties that they can dispose of as quickly as possible if they need to. The more attractive the property it is, the easier it’ll be to find tenants and dispose of if necessary.
Make sure the figures stack up. Do some calculations and research other rental properties in the area before you make an investment to ensure you’ll be able to generate the highest possible returns. A good rental yield for buy to let property is around 7% or more, so focus less on what the property looks like and more on what it’s going to do for your bank balance.
Don’t underestimate the importance of parking. Whether you’re buying terrace houses or properties on a new estate, insist on a drive or allocated parking. Modern tenants are more demanding than ever; if they’ve got to hold out for a space on the road or buy a parking permit, they’ll look elsewhere or ask for a reduction on their monthly rent, so steer clear.
Never buy blind. As tempting as property auctions may be, assessing the condition before you buy will help you determine whether you’ll be able to break even. Every property is going to need a few repairs and changes, but if you’ve got to rewire, remove damp and replace the windows before charging £300 per month, it’s going to take a long time to generate a return.
Those who rent are more likely to rely on public transport to get to work and the shops, so look for properties in key locations or close to transport networks. You’re better off buying a property in the town centre or close to a train station than you are in the middle of nowhere.
When you buy a freehold property, you’re buying the ownership of the property and its land. With a leasehold property, you’re only buying the property. Most apartments are leasehold but leasehold is becoming increasingly popular on newer housing estates to cut costs and siphon money from homeowners. Stick to freehold properties or at least calculate costs of leaseholds before you make the commitment - not only monthly payments but extending the lease within the next fifty years and future sellability when you want to dispose of your asset.
In some parts of the UK, local authorities require landlords to apply for a license before they can let their property. Properties and streets affected are usually chosen because of low demand, high levels of anti-social behaviour and poorly managed tenancies. Check to see whether your property falls into this camp before you buy; if you don’t, you could be fined.
Though many landlords invest in different parts of the UK, being close to your buy-to-let has its advantages. You don’t want a five-hour round-trip every time you have to meet potential tenants or make an inspection. Buy local first, and look further afield as your portfolio grows.
If you’re buying a two-bed in a village with no public transport and a ten-mile drive to the local supermarket, a young family probably won’t be interested. Look for properties close to shops, schools, hospitals, and other amenities with a high employment population density.
Though there’s no “ideal” time of the year to pick up a buy-to-let property, there are some quiet periods that you should avoid. Want to buy and have tenants move in immediately?
November to January is usually pretty quiet, as most tenants are settled into their current properties in the run-up to Christmas. Wait until February and see where the market’s at.
It can be overwhelming when buying your first BTL property but armed with the right strategy and information, there’s nothing to worry about. Check back to the Billing Better blog soon for more tips and tricks on becoming a good landlord, and check out our revenue generator for landlords, offering £20 per property per month by recommending our services to tenants.