With demand for housing outstripping supply and interest rates at an all time low, buy-to-let properties are currently an attractive choice of investment. The appetite for rental property seems insatiable and given the uncertainty of the stock market it is not surprising many are considering bricks and mortar a safer bet.
The UK’s private rented sector (PRS) has doubled in size in the past decade and is increasingly attracting the attention of pension funds, insurers and other institutions. So if the big boys are doing it why shouldn’t you?
If you are thinking of dipping your toe in the buy-to-let water, you’ll need to avoid some pitfalls and give your investment the best chance of success. With this in mind, Currell’s Head of Residential Investment, Anna Ainsworth gives us her top 10 tips for buy-to-let investment success.
1. Set your budget and negotiate
Everyone has a budget when it comes to investing and buy-to-let is no different. Knowing what you have to play with can focus your search on an area where your budget can acquire the asset you need. Remember, you don’t have to offer the asking price. In strong markets it’s not easy but negotiation is part of acquiring the best investment you can.
2. Think about other costs
The cost of borrowing, legal fees and tax implications all need to be put into the mix when appraising your investment. Getting professional advice on these matters can save money in the long run.
The clue is in the title. You need to buy something that will let easily, not something you think is quaint, cool or quirky. This is not your home, and sometimes boring is less risky. What you want to do is minimise void periods so something that is easily let, with strong tenant demand, is essential.
4. Yields are not everything
The rate of annual return on your capital investment in terms of rent is your yield. There is lots of talk of good yields but residential investment yields are often viewed as low. However, higher yields bring higher risks. Capital growth should also be a key factor as capital growth can be more lucrative than income. Don’t count just on yields or capital growth though, view them as a whole. This will give you a much clearer overall picture of your returns.
5. Capital growth
Harnessing good growth potential is an opportunity not to be missed. Areas with potential such as regeneration areas, ones with Improving transport links or that have neighbouring districts where price rises are pushing people further out are often a savvy investment.
6. Transport links
Renter’s enjoy choice and one key criteria is convenience. Good transport links are high on most renters list of requirements.
Rental properties get their fair share of wear and tear so maintenance must be factored in. Knowing this before you invest may give you a steer about suitable properties to acquire.
8. Think outside your box
Often the best buy-to-let areas are not necessarily where you live. Be prepared to think outside of your geographical box and look further afield to open up the best opportunities.
9. Learn to love estate agents
Yes, they are a class of their own but if you befriend them they can help you with research. Jokes aside, the best agents undoubtedly have unrivalled local market knowledge so use that to your advantage.
10. How hands on do you want to be?
Buying a property is only the first step. You will need to find a tenant, deal with enquiries and collect payment. It is possible to do this yourself but if you’ve a full time job you may prefer to hand the property management to an agent. For a percentage fee they will find tenants, deal with problems and have relationships with plumbers, electricians etc. should repairs be required. You can make more money by renting the property out yourself but are you prepared to give up weekends and evenings on viewings, advertising and repairs?
Anna Ainsworth’s role as Currell’s Head of Residential Investment includes sourcing residential product on a multi-unit or bulk deal basis. Her 16-year career in property has included working as acquisitions director for Imagine Homes, as a land buyer for Bellway Homes and as a general practice surveyor.
If you would like to speak to Anna about your residential investment requirements, please call her on 020 7354 5050 or email A.Ainsworth@currell.com