Investing in a property for the first time is a thrilling concept, although appealing, the process is often not always as straight forward as it initially seems.
If you are new to the world of property investment and still considering purchasing your first buy-to- let then there are a multitude of factors you need to consider to ensure the process runs smoothly.
Before delving into the world of property investment here are some pointers for first time buyers.
Knowledge is power – Your aim is to ensure you’re buying the right property, in the right place, at the right time and at the right price.
It is important to consider what type of property is right for you and what you hope to achieve from it; whether it is capital growth, rental income or in most cases both.
Due to a range of buy-to-let properties available there are more types to consider, such as purpose built, student and overseas, renovation, these must be evaluated to establish which best suits your needs and will help you achieve your future goals.
It is imperative you don’t over commit and that you can afford to own, manage and maintain your investment property.
Determining how much you can afford to spend on an investment impacts the type of properties you can consider.
It is important to focus on the merits of the property’s location rather than just the property itself and one of the best ways to ensure you have guaranteed rental income for your buy-to-let property is to do thorough research into the area you want to invest in.
The location you chose to invest in could make the difference between a successful investment and an unsuccessful one and your budget will determine which location you can afford. £250,000 won’t get you very far in cities like London whereas you can get more for your money if you invest in Northern cities.
Some investors choose to limit their property search to where they live for ease of management and peace of mind. Although, it may be wise to consider other areas if you’re looking to maximise returns. Location is key for prospective tenants.
It is sensible to choose an area where the rental market is strong and there are numerous indicators you can observe to assess whether your investment is safe and stable when it comes to rental potential.
Schools, local amenities, transport links and low crime rates are all measurements you can use to scout out an area where people want to live.
Buy-to-let hotspots such as Liverpool and Manchester offer some of the highest yields in the UK and are perfectly positioned to attract working professional tenants. You should consider why specific types of people would be interested in a particular property. For example, for parents with small children it would be important to find a location with well-regarded schools and universities.
This is how much annual rent your property receives as a proportion of the price paid for the property. Prospective buyers should estimate their potential return on investment and rental yields before committing to a purchase.
Rental yields in the North West prove higher to the likes of London, with Liverpool offering around 6%, it is a key area investor’s focus on for maximum returns. RW Invest specialise in student and residential buy-to-let property predominantly across the North-West region with excellent rental yields securing lucrative property investments.
A question you need to ask yourself is how much do you want to make from your investment to make it profitable. There are additional costs when investing in a property that must be considered on top of initial cost and eventual rental payments. Maintenance cost also come into the equation.
Undoubtedly, buy-to-let can be very profitable and many landlords use property investments as their sole source of income. Increasing your property portfolio allows you to maximise returns but it is important to have a sensible outlook when it comes to your finances.
It is important to decide what monthly rental return you would require to cover your expenses and provide you with a good return.
Financing your buy-to-let property is a key factor to consider, many prefer to purchase their property in cash, although there are still some who prefer to finance their investments with a mortgage. It is important to consider that most lenders will want rental payments to cover at least 125% of the repayments on the mortgage.
If you purchase an off-plan property you are more likely to get yourself a bargain. This is a type of property that is purchased before completion. This can raise alarm bells for some investors and they remain cautious as they are committing a property you cannot physically see, nor one that is completed. However, as off plan is generally cheaper, it is a perfect way of investing in property.
What are the needs of your tenants? If you are looking in investing in student accommodation it is important to weigh up factors such as convenience to local universities or high-speed broadband for ease of studying. These are all amenities which allow the tenant, in this case a student, to get the most out of their property.
Put yourself in the shoes of the target tenant. Who are they? And what do they want? It is important for tenants to make their own stamp on a property, such as paintings, furniture to make it feel more like home. These tenants will stay for longer, which is a positive for any landlord.
8. Track Record
A significant factor to consider is to look at the track record of the company you are thinking of investing with. It is important you are in partnership with a company you trust and you know are reputable. You can research companies and discover other people’s opinions by looking them up on Google reviews or Trustpilot.
9. Purchase Costs
There are certain costs you can incur when purchasing a buy-to-let property. For example, if you purchase with a mortgage then you may need to pay a fee to your mortgage advisor and then the later repayments on mortgage.
10. Letting Agent
You have a decision to make after the purchase of your property. You must decide whether you would like to instruct a letting agent to manage your property, this proves costlier however they will deal with all maintenance and repairs efficiently. On the other hand, managing it yourself will save you money. However, with the latter you must ensure you are contactable by your tenants at all times and assist with any viewings or repairs.