For many people, the best way to invest is to put their money into property rather than savings or other options such as stocks and shares.
This can be a very profitable route, and is often considered a safer option for your money, but only if you invest it in the right assets. It is important to take adequate time to review your options as well as how long you want to keep your money tied up in the asset and what you want to achieve.
Here, Mark Burns, Managing Director of Pure Investor, takes a look at how to choose the best buy to let property for you, and what you need to think about.
The biggest thing you need to consider when buying an investment property is how much you have to spend. This will include looking at how much cash you have available and whether you are considering a mortgage. You also need to consider other costs like insurance to ensure that the rental income you receive exceeds your expenses. This will help you prepare a final budget for your investments, and it is important that you stick to it.
It’s important that you know exactly how much rental profit you can make from your property, which will require some homework. You should take the time to research other rental properties of a similar type and in the same area to get an idea of what you can expect. You should also keep an eye on the market for some time to see which properties get sold first and which ones hang around for some time.
When investing in a property, you will probably be doing it with the intention of renting it out to other people, so you should consider what type of tenants you are expecting. Are you buying a property that is for a family, young professional couple or students? Once you have a picture in your mind of who you want to have as your tenant, you can find a suitable property.
head not heart
Generally, there is a certain amount of emotional attachment when you buy a property, but when buying a rental property you cannot let your heart get in the way of business decisions. Make sure you make a plan for your wealth and stick to it, rather than falling in love with something that has little chance of making you money.
If you’re looking to rent out your property, it’s important that it meets certain standards, and you’ll need to consider whether you need to improve it. This could include installing a new bathroom or kitchen, installing new carpet or landscaping the garden, so it should all be factored into your financial plan.
Another thing you need to consider is who will be in charge of the general maintenance of the property. Some landlords prefer to deal with problems and repairs themselves, while others prefer to use a letting agent who can sort out the hassles. This can reduce the stress of renting a property, but it can also cost more.
When purchasing a property to rent out, most investors do so with a view to selling it further for a profit. You should have a plan for how long you intend to hold the asset and what percentage of profit you expect to make from it. This means that when choosing your property, you need to find something that will hold its value well, remain desirable or can be improved to increase the value. Thinking about how much a property will sell for before buying can help you choose the option that will get you the best returns.
When you look at properties, you should think about what type of building it should be. Are you considering buying a flat – and if so, will there be other fees involved? If you’re looking at a new build, you need to consider how long the development will take to complete and whether there will be an initial decline in property value. If you’re looking at older properties, it’s important to pay attention to any restrictions that may limit the improvements you can make, such as whether it’s a listed building.
Your hometown may not be a place that offers good rental yields or property prices, so it may be beneficial to look further afield. Cities such as Manchester and Liverpool are attracting investors from across the country as they offer far better opportunities than some of the other options located further south. You will need a lot of research to know these areas better and make the right purchase for you.
The amenities and facilities of the local area are particularly important and you need to take these into account. For example, if you’re looking for a family property, you’ll need to make sure there are schools with good Ofsted ratings in the area.
Professionals will be looking for good transport links and nearby job opportunities, while students will want to live close to their universities. Properties that don’t tick these boxes with your target market are likely to be overlooked or fail to achieve your desired rental income.
It is important that you keep in mind that investing in a rental property is a business decision, and therefore your own preferences and desires should be kept out of it. Make a plan and then make sure you stick to it, and you’ll soon be able to find the investment property that’s right for you.