What to look for in a buy to let.
One of the most frequent questions I get asked from would be Landlords, what is the best type of property to buy? It is also the most sensible question to ask yourself. Purchasing a property to most people is the biggest item they will have ever bought in their life. If you’re buying it to live in then you will know exactly what your criteria is and you buy from the heart. When looking for a buy to let you need to engage your business brain as this is going to be a business decision.
Obviously we have to start with a budget. This needs to be an enjoyable and shrewd experience as well as giving you a regular income so always keep within your pre defined budget. Whether you are a cash buyer or need a mortgage always keep within your limits. Remember to allow for Conveyancing fees, stamp duty etc. it may well be that whatever you buy needs some work doing to it to bring it up to a letting standard. Make up a spread sheet to manage your costs it really does help.
If you are looking to buy in your home town you will already know which areas you are likely to be able to afford to buy in. Generally the lower the price you pay for the property the lower the rental figure will be. However by rule of thumb you need to be looking at something that gives you at least a 5% gross yield. How do you work out the gross yield? It’s a simply calculation. Multiply your anticipated monthly rental return by 12 and divide this figure by the cost of the property (As an example if you purchase a property for £170,000 and the rental return is £700 per month = 700 x 12 = 8400 / 170,000= 0.049 or a 4.9% yield). As I mentioned before this is a business transaction so you need to know that the figures work for you.
Obviously your budget determines the size and location of your investment but as a general rule a 2 bedroom property is statistically the most popular accommodation searched for by tenants. However if you can afford a larger property you will always find a demand from families looking for long term tenancies. If this is the market you are aiming for then I would suggest some research into local schools as often you will find it beneficial to buy in a catchment area for a particular school to increase demand for your property. Flats are often sort after by single Professional people who do not want the responsibility of looking after gardens etc and want to be in the centre of a town or city. My advice when looking at flats is to check that the communal areas is well kept and looked after, the annual maintenance charge and ground rents are affordable and most importantly that the lease is for a minimum of 125 years. Mortgage lenders will want to see long lease terms and this will also protect your investment in the long term.
If you are not sure what area is going to offer you your best investment then go and speak to some local Letting/Estate agents. You are probably going to need to use one once you have purchased your property so this exercise is useful in two ways. They will advise you which areas and more sought after for tenants as well helping you to decide which one you might want to use to obtain a tenant once you have purchased your property. You need a letting agent that will be pro active with your property. Most High streets have a good choice but don’t forget the online agents; they can often save you money but still offer you a professional service without the overheads.
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