It pays to do your homework before buying a property to let
patience and a willingness to do the relevant research.
So how do you go about this? First, you need to consider whether your priority is buying a property whose value will keep increasing or one that will give you a greater return on your investment year-on-year.
The next step is knowing your market. Whether you want to invest in an area you know and be hands-on or somewhere further afield where you may need a letting agent, you have to know the market conditions.
Buying a rental property is pointless if there is no tenant demand and you do not want to start by paying way over the odds for a home.
This is why doing your research on an area is so important. You need to check the property sections of the press, visit property portals and do the rounds of the local letting and estate agents. Find out what the house prices are and what the going rates for rents are. Speak to the local agents to gauge likely demand for rental property and ask anyone you know who has invested in that area for their opinions.
When it comes to investing in an area, you have to be objective. Do not be persuaded to buy a property because it has a quirky charm. The chances of such things appealing to potential tenants are slim – and appealing to tenants is what your buy-to-let investment depends upon.
You must concentrate on location. Is the property in the commuter belt? Are there good public transport links to the nearest towns, city centre or work places? How good are the nearby schools? If you are looking to let to students, how easy is it to reach the college or university? These questions have to be asked. If the answers are not positive, it may well be worth looking elsewhere. There is no point in buying a wonderful home for buy-to- let if you will struggle to let it. If it is not in the right place for your potential tenants, it is not worth buying. That is the case whether you are looking to rent to families, students or young professionals.
Different types of tenants bring different issues so you need to know who you are aiming for: there are higher risks and higher returns in the student and house in multiple occupation (HMO) markets than there are in renting to professionals. You have to decide on your target market.
Once a location has been decided upon, there is no reason to buy the first property that appears on the market. A house may tick the boxes that we have just outlined but that is no guarantee that it is ideal.
For example, what are the neighbours like? Trying to keep a property rented that is next door to noisy, untidy or aggressive neighbours is a struggle. Tenants will never stay long, meaning a loss of rental income and struggles to find replacements.
However, it can pay to settle for less than perfect when it comes to the condition of a house. If a property meets the criteria but is in poor condition, it could be an opportunity. It may cost thousands to bring it up to standard, but if that is reflected in the asking price it could prove a sound investment. Whatever the type of property, be methodical. Work out how much capital you can invest in it, what sort of yield you are looking for and what the likely repair and maintenance costs will be.
Luke Gidney is founder of letting agency Let Leeds, letleeds.com