Here are seven tips to unlock the door to a profitable buy-to-let property portfolio. With these simple reminders to finding the best investments your next investment should meet all of your personal requirements, and not end in disaster.
1. Price test
“When considering your investment property options it is extremely important to make sure the price is right,” says owner of British real estate agency’s Belvoir Birmingham Central office Major Mahil.
“To do this you should research the local market to make sure the property you’re interested in is in line with current market conditions, and is not over-priced. If it is, don’t be afraid to say so. Vendors are often happy to negotiate, especially if you can prove the property price is inflated, plus you’re in a good position to proceed with the purchase at speed.
“Buying at the right price means you can maximise the rental yield, and this is essential in creating a good property investment,” continues Major.
“If you’re unsure what the current rental value will be for the property, ask the advice of a local letting agent.
“Also, think carefully about capital growth and your overall exit strategy. If you pay too much for the property today, you will be reducing your potential profit later.”
2. Location lowdown
“It’s essential to invest in properties that are in the ‘right’ location,” says co-owner of Belvoir Liverpool Central and Belvoir Liverpool West Derby Adam Rastall.
“Properties in good catchment areas with low crime rates and attractive surroundings will attract good quality tenants, and also dictate how true of a yield you will actually receive.
“Investing in a poor quality area may produce a great yield on paper, but it may take time to find a tenant or it may attract the ‘wrong’ type of tenant who end up defaulting on their payments.
“Good nearby amenities, such as shops, supermarkets and restaurants, are also valued by tenants and can help a property let within a short time, as can accessibility to bus routes, major road networks and transport links.”
3. Supply and demand
“Before committing to a property purchase, researching the local rental market is vital,” says owner of Belvoir Melton Mowbray and Belvoir Bingham Charlotte Baker. “
“In some towns we don’t have a student market, so investing in accommodation tailored towards students would be futile.
“Do your research carefully. What is the current tenant demand in your area? And, just as importantly, what is the level of property supply?
“Investing in an area with a low demand from tenants or an over-supply of rental units can lead to periods of voids – even for the most impressive properties – so make sure the local market is buoyant and moving at a healthy pace for the particular type of property you’re purchasing before you commit.”
4. Repair or replace
“When viewing a property as a potential investment option, it is vital to consider any maintenance that needs doing now., or in the future,” says Major.
“Make sure the boiler is fully functional as this can be quite expensive to repair. Also make sure the plumbing is sufficient and fit for purpose. The same goes for wiring, roofing and windows. Bathroom suites and kitchens should also be in a good condition as these can be costly to replace. In addition, having a professional survey on the property is wise in order to prevent any nasty surprises later.
“Also, to limit time-consuming renovations and updates before the property can be let, it’s worth concentrating on properties which will already appeal to tenants. Neutral bathroom suites, modern fitted-kitchens, hard-wearing laminate flooring, plus neutrally decorated rooms can all be beneficial.
“Low maintenance properties often make the most profitable rental properties because they are likely to be ‘move in’ ready so you can start earning a rental income straight away, plus you’ll have to spend less on major maintenance issues moving forward too.”
5. The great outdoors
“Low maintenance outside space is often appealing to tenants and can help add a premium to the rental price you can ask,” says Adam.
“Families with young children in particular will often ask to view only those properties with a garden, so make sure the quantity and quality of outside space is adequate for your target tenant.
“Parking is also another thing to consider,” continues Adam.
“Has the property got off-road parking or a safe place to park nearby? Most tenants will have at least one car, and parking (or lack of it!) can make or break a tenancy decision. This becomes particularly pertinent in cities or built-up areas where on-street parking is unavailable or restricted.”
6. Added value
Can extra value be added to the property at a later date? Either for the rental market or on resale?
“If your long-term strategy is to maximise profit from capital appreciation, could future alternations be made that will considerably raise the property’s resale price?” asks Charlotte.
“Perhaps you could add a conservatory, extension, convert a garage to living accommodation or implement a loft or basement conversion? Even if you don’t want to do these alterations yourself the potential for them could certainly make the property more attractive to buyers.
“Even when viewing an investment option for the very first time, always think what about what long-term promise and potential it could offer in the future.”
7. Experts on hand
“One of the best ways to find the right investment property for you (and your budget) is to ask your local lettings agent for advice,” says Major.
“They will have extensive local knowledge and will be able to research the available current housing stock on your behalf. They will know the best places to invest and where the most demand is, plus the most suitable property types for the rental market.
“In addition, they’ll be able to offer advice on potential rental return, yield calculations, the likelihood of long-term maintenance issues and how to avoid the dreaded ‘void’ so that you can grow your property portfolio at speed and maximise each of your investments with ease.”
“Even when viewing an investment option for the very first time, always think what about what long-term promise and potential it could offer in the future.”
And don’t forget to think about the following too…
- Is it a freehold or leasehold property?
- What will your exit strategy be?
- Will there be any hidden costs?
- What is the potential for capital appreciation?
- How energy efficient is the property?
- Will there be management charges? If so, how much?
- If successfully purchased, will there enough budget left for emergencies?
