Now that the buy to let investment climate is a little more, shall we say, testing you really can’t just expect to buy any property and make money from letting it anymore. The good news is that you can still find good yields …. but you need to be a little more selective about what you buy to let.
Here’s how to spot the best properties for a buy to let investment:
* One of the first things you need to understand about buy to let is that the properties with the best potential probably aren’t the properties you’d buy to live in yourself. In fact, they’re often the properties and areas you wouldn’t dream of living in yourself!
* Lower priced properties. It’s almost always the case that the more you pay for a property the lower the rental yield will be. Lower priced properties often return the best yields and, also, have the best potential for capital appreciation in the long term too.
Lower priced investment properties keep the stamp duty bill down too.
* Small properties. Yes, maybe everyone dreams of a living in a house with five bedrooms and a four car garage but in the scheme of things there’s relatively little demand for these kinds of properties and yields are low.
By and large more people are looking for small, compact, cheap to run properties so there’s more demand and they’re easier to let. Flats, terraced properties and small detached/semi-detached fit the bill perfectly.
* Properties in need of renovation and refurbishment. These offer scope to add value and earn yourself an instant capital profit before you’ve even put them onto the rental market.
In today’s investment climate, it’s very important to try and add value to your buy to let wherever possible. It can make the difference between a buy to let that is unviable, and one that is very viable.
Another added value technique to consider is a commercial to residential conversion.
* Areas with good facilities. Yes, maybe many people dream of living in a quiet rural village with only passing sheep for company. But such locations aren’t practical for most people looking to rent property.
When selecting a property for buy to let the following types of areas are usually best. Cities and towns. Areas that have a supermarket and a good selection of shops. Good bus/train connections. Good road connections. Nearby schools and facilities for childcare. Decent social/entertainment facilities in close proximity.
* Low income areas. In these places few or even any people are able to afford to buy, so there’s more demand for rental property.
Another good reason for targeting these areas – when you’re buying there’s less competition from owner-occupiers and so selling prices are usually more reasonable.
* Areas that attract temporary or contract workers, including workers from abroad. These areas normally have continual, brisk demand for rental property so properties are easier to let and voids are minimised. So – look for areas that have large business/industrial parks or warehouse units.
Areas that are popular with students can be good, for much the same reasons.
* Properties that can be used for something else other than a standard single family buy to let. Houses that are suitable for letting as shared accommodation (a HMO), or perhaps as a daily/weekly let, usually offer far higher yields.
Lastly: When you’re selecting a property for buy to let put yourself in your prospective tenants’ shoes – and slip out of yours! Ask yourself if the area has plenty of potential tenants, and if the area and type of property is likely to be in demand with those people.