Making your first property investment can be daunting. Indeed, such an important purchase requires a considerable amount of research to ensure you are able to enjoy the many benefits it can offer. From choosing the right area and tenant, to selecting a mortgage that allows you see strong financial returns, below we offer some advice on what to look for in a property investment.
To make the task a little easier, we have prepared a step-by-step guide with some key considerations you need to make to ensure your investment is the right one.
Choose the right location
Some of the main considerations you should give thought to when thinking of areas to purchase in include:
- Transport: Are there good transport links for tenants to travel to and from work? And for schools and local amenities?
- Schools: Parents will be attracted to areas that have reputable schools nearby – see how local primaries and secondary schools are rated.
- Crime: Tenants want to feel they are moving into an area that is safe and with low levels of crime. You can use the Police website to check this.
- Amenities: Are local shops, supermarkets and doctors/dentists close-to-hand? Are there local entertainment such as bars, restaurants, theatre and cinema in the local area?
If you can choose an area that meets most, or all, of the above, then your chances of attracting high quality tenants will increase quite significantly.
Finding the ideal tenant
Who would you ideally like to live in your property? There are different needs for different types of tenant.
For example, young professionals are more likely to want modern and stylish dwellings. Families will need space and the option to put their own personality into the interior of the property. Students usually look for a clean and convenient environment that won’t cost them too much money.
Tenants that want to carry out small alterations to make the property feel more homely, such as hanging pictures or replacing existing furniture, are more likely to want to stay for a number of years.
Research the buy-to-let market
Before making any sort of financial commitment you should carry out in-depth research on the buy-to-let market. You need to make sure it is the right fit for you before moving forward.
Investing in buy-to-let requires you to also take out a mortgage for the property. If house prices rise, you may be able to make significant gains above the outstanding mortgage, but the opposite is also true if prices drop. This can affect your deposit while the mortgage remains unchanged.
There are some great yields to be made by buy-to-let investors, but you should be aware of the benefits and potential pitfalls. Talk to others you know who may have invested in property and be sure to do as much research as possible.
Consider your financial returns
The reason for investing in buy-to-let is to enjoy healthy financial returns, so do your calculations before making any moves in the market.
Most buy-to-let lenders will require rent on the property to cover between 125-150% of the mortgage repayments. This is on-top of the 25% deposit required (sometimes more) you will also need to provide upfront.
Then there are things such as maintenance and tax to factor in, and any periods where there are no tenants in the property providing income to cover the mortgage repayments.
Once you know how much mortgage must be repaid, be sure to add on any additional costs so you are fully aware of how much rent you should be charging to make a profit. You can do this by calculating the yield, which is the how much annual rent is received as a percentage of the property’s value. For example, receiving £15,000 on a property purchased at £250,000 will produce a yield of 6%.
We have properties in areas that are popular to students and professionals alike, close to major universities and economic hubs like Canary Wharf.
To get an idea of the types of properties we have for sale, visit our sales page.
View properties for sale
To get an idea of the levels of rent in our respective areas, view our properties to rent.
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