Getting involved in the buy-to-let market can be an appealing prospect for many people.
Whether buying a single property as a means to make a second income or building a larger property portfolio and becoming a full-time, professional landlord, there are numerous reasons why this investment approach is a popular one.
Here we look at some of the top tips for those considering investing in a buy-to-let property.
Choose the right type of property
Work out what kind of properties are in demand in the area which you are looking at. By speaking to a local estate agency which specialises in property lettings, you can get an idea of where the market is currently at.
You will most likely have a personal preference when it comes to the type of property you want to invest in, whether it be an apartment, family home or student accommodation.
Of course a lot may depend on your budget and individual circumstances. But it’s always going to be a good idea to work out which types of property are in high demand from potential tenants.
As well as identifying which property types are in demand, you should also carefully consider which locations are highly sought after. Once again, it will be worthwhile speaking to the professionals, especially if you are not overly familiar with the different areas and what they have to offer.
Here on Tyneside, places such as Jesmond, Gosforth, Sandyford and Heaton will always remain popular amongst a whole range of potential tenants, such as students, young professionals and families.
When it comes to location, consider things such as proximity to the city centre, transport links, local schools and nearby services.
Remembering it’s an investment
When looking to invest in a buy-to-let property it’s crucial to remember it for what really is i.e. an investment. This is not going to be the place you live in, so you should try and think with your head rather than your heart when it comes to making key decisions.
For example, you may have certain decorative tastes in your own home and like the idea of a big garden. These things won’t necessarily be so appealing to potential tenants.
A property with a neutral decorative style and small garden which is easier to maintain will likely attract a larger pool of people interested in renting it from you.
With any investment, it’s important to try and calculate what your likely rate of return will be in order to understand whether it will be worthwhile or not. When it comes to purchasing a property with the aim of renting it out to generate income, this rate of return is known as the yield.
The yield can be calculated by dividing the annual rent by the amount you paid for the property. So for example, if you purchased a property for £200,000 and it generates £10,000 in annual rental income, the gross yield would be 5%.
Estimating the net yield is also important. This takes into account other likely costs that will arise each year, such as property maintenance fees.
Using the example above, if you were to bring in £10,000 each year in rental income but spend £1,000 each year on other associated costs, you would be left with an income of £9,000 and a yield of 4.5% (assuming the property cost £200,000).
This handy online rental yield calculator can be used to make these calculations quickly: https://www.landlordvision.co.uk/rental-yield-calculator.html
Be Positive but also sceptical
You should feel confident in the investment you are about to make but it’s also worthwhile being open-minded to the possibility of periods without income. There may be certain times in between tenants which last longer than you would ideally like. But by being well organised and using a reputable letting agent, you may be able to minimise or even completely avoid these no-income periods.
Choose the right agent
It is possible to self manage your rental property, but it certainly makes it easier if you opt for an experienced company to help. There will be different levels of service you can choose from. A tenant-find only arrangement is the most basic level, followed by a tenant-find and rent collection service, which allows for the agency to be responsible for collecting rent each month on your behalf.
However, a full management service is often the best type to opt for, especially for those who are buying an investment property for the first time.
Here at Pat Robson & Co. we offer a range of property management services which cater to a variety of different needs.
Get in touch today to see how we can help.