Investing in Buy to Let Property

Buy to let property row of houses

Buy to let property is a popular purchase trend in the current market, and many people looking to invest their savings are considering becoming a landlord in order to achieve the best return on their investment. However, there are a number of elements to consider when purchasing a property to rent out, such as which property type to buy, location and how you would go about managing the property.

In the past, houses of multiple occupation, commonly known as HMOs, have provided the best return on investment as they are usually large houses or buildings with communal living areas and private bedrooms. They tend to suit tenants who are unable to afford larger properties, and are very much in demand with university students and recent graduates looking for affordable accommodation.

The return from investment in multi-unit freehold properties is on the rise and these are currently the most lucrative buy-to-let properties. This entails buying a larger property and converting it into multiple self-contained flats/rooms, or alternatively buying an existing block of flats or commercial unit, converting it and renting each room/property individually. Although this option may offer a higher return than a typical 2 bedroom apartment, it may also require a higher initial investment.

Mary Latham, experienced landlord and author covers some of the dangers of buying a property and converting it to a HMO here.

As written in an early blog post – where to buy a buy to let property, investors may be considering, countryside, coastal location or urban dwellings. Naturally, there will always be other factors when making this decision such as:

  • Do I need to be close enough to the property to manage this investment?
  • How much work will it take to get the property tenant-ready?
  • What will the ongoing costs to maintain the property be and is there enough demand in the area to keep my investment paying?

Proximity to the property would influence an investor on whether they would personally manage the investment or have a High Street Letting Agent manage it for them! The former could save you, which in-turn makes you, on average £1,900 a year. Taking a few hours initially and an hour a month (if necessary) of your time may be worth it to some investors, particularly those with a lower rental yield.

Secondly, any property bought closer to the owner will make it easier and probably cheaper to get tenant ready! Owners of properties in London, SW14 and who live in Cornwall will most probably have an Agent. They in-turn may use a third party maintenance company who will possibly outsource the job to a final contractor. The truth is you just don’t know. You just get the final cost of maintenance which is either justifiable or you mark it down to just doing business. Keeping it local and within your control should always mean less money will be taken from your rental income.

If your decision is to take on a buy-to-let investment and manage it personally, then location wise, keep it close to home. You have saved and made money already. If your hands are tied, you just can’t afford the 12 to 15 hours a year then the following considerations on location should be taken:

Landlords should consider the local economy of an urban, village or coastal town. Is industry sustainable? Employment seasonal? Are there any larger corporate employers who offer the location plenty of tenants? Apart from doing local research and answering these questions to ones’ satisfaction, Investors can easily check how long rental properties in the area have been on the market for. Should the majority of properties be listed for more than six weeks it would indicate an oversupply and investing in that area should be approached with caution.

Many potential buy to let investors may just need to start by adding up the costs and saving one would need to spend or save, look at the sums and make a financial decision on all of the above factors. No doubt the numbers will come out favourably for one of the three locations and that should be that decision made.

The above points should have you asking yourself the right questions and get you on your way to getting that property you are looking for. Good luck!

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