What Makes the Perfect Buy to Let Property?
ARLA Propertymark has issued a warning that rental stocks are dwindling, particularly in London, where the number of available private rental properties is said to have dropped by 71% in the last year. More tenants are signing up to letting agents, but landlords are leaving the sector due to the Covid-19 pandemic. This creates a great opportunity for new landlords to enter the market but, if you are thinking of making the leap, what makes the perfect buy to let property?
This handy guide will give prospective landlords an insight into selecting a property that will serve them well as an investment, bringing in rent whilst also building capital for the future.
Research the Yield
You need to ensure you get a good return on investment for your buy to let property. Experts suggest looking for a yield of 5% or more. This is the difference between your total costs and the income that you earn from the property.
Calculating the yield involves research. You should look at how much people are paying to rent on similar properties in the same area to understand how much you can charge. You also need to bear in mind the interest you will pay on your buy to let mortgage, any ground rents that you might owe and the costs of updating and maintaining the property.
If you still think you can earn 5% or more from renting it out, it is definitely a good sign that this could be the right property.
Once you know you CAN make a return on the property, you should look into whether you WILL. Is there a demand for this type of property and, importantly, is it right for the location? If you find a number of properties that resemble your target have been languishing on the market in the same locality, that is a red flag that the demand just might not be there.
One note of advice would be to talk to nearby letting agents and find out which properties they find easiest to rent to tenants and which they have a shortage of right now. They can also use their local expertise to tell you which buy to let properties to avoid, as well as how long you can expect it to take from advertising to onboarding tenants.
Don’t just think about current demand. You should also look to the future as well. If there is going to be a major investment in transport infrastructure in the area, for example, it is likely that it will become more sought after, meaning you might be set for an even bigger return on investment from both the capital in the property and rental payments.
Settle on a Property Use
One buy to let property is different from another, especially when it comes down to the use of the property. You must decide what type of tenant you are looking for. For a professional couple looking to rent long term? Then seek out smart properties near city centres. For families, somewhere in the suburbs with outside space and multiple bedrooms. If you want to rent to students, you should have multiple, good-sized rooms and be located close to the university or college.
Your ideal buy to let property is guided by the tenants that you hope to engage.
How Will You Maintain the Property?
You will be ultimately responsible for ensuring the property is maintained to a good standard, so you need to think about how you will ensure that happens. If you intend to do the work yourself, the property needs to be reasonably close to where you are based. If not, you should make sure that you have access to a person or business that can take care of maintenance nearby.
Outsource Property Management for Your Buy to Let Property
If you want to ensure that your buy to let property is run by a professional, experienced and high-quality property management service, talk to us today. We offer two different packages, taking tasks such as maintenance, tenancy admin and rent collection off your hands. This ensures they are performed in a compliant and efficient manner and saves you time. We take many of the stresses of renting out a property from your shoulders and your tenants receive excellent service at every stage of the lettings process. Call us today.