The demand for rental properties across the UK has soared over the past 12 months, outstripping supply in all parts of the country. Whilst the number of tenants has risen dramatically – by 20% at the end of last year – the number of homes available to rent during the same period had dropped around 17%.
A recent report on new tenancies showed that this mismatch in supply and demand has pushed up the rental price on property across England, to an average cost of £899 a month – great news for landlords but not so their tenants. The time is now for property investors, however, is buy-to-let the right option for you?
Here are some of the key considerations you need to take before making a commitment.
Do your research
Determine the type of tenant you want to have, and this will give you some indication of the type of property that most appeals to you. For example, two bed new builds have been favoured by some property investors, as they mainly attract young professional tenants who are reliable when it comes to paying the rent.
Another consideration would be the type of buy-to-let mortgage you require – the property type will have an impact on the mortgage rates – you may want a four bed house but find you can only really afford a one bed flat.
Location, location, location
Building a profitable property portfolio comes down to a number of factors, but an important aspect is the location. Again where you invest will be influenced by who you ultimately want to let your property to – but it is also wise to consider where the sort-after and up and coming locations are. Recent research on top buy to let hotspots in Britain, shows that in the last 12 months the highest buy-to-let yields have been in Southampton at 8.73%. Surprisingly, yields were lowest in central London at only 4.3%.
Choose a good conveyancer
Getting the best conveyancer will ensure a smooth transaction of the property and is likely to make the sale as speedy as it possibly can be. Work out budgets and then decide how much you can really afford – it’s really worth investing in a good conveyancer.
Estate agents will often recommend conveyancers they’ve built up a good relationship with, but you’re under no obligation to go ahead and use them, especially if their products or services are not right for you. Saga Legal Services reported that Britons think moving house is the third most stressful experience in life, and their smooth moves guide to conveyancing helps by recommending shopping around and going with a conveyancer that’s transparent and upfront so you avoid escalated fees.
Consider the risks
All financial investments come with a certain element of risk attached. With a buy-to-let investment you can make money from the rent, and capital growth through the value of the property increasing. So on the flipside, you need to consider that you can lose money where your outgoings outstrip the rent you make, or the value of the property drops.
Look at all your options
The majority of buy-to-let investors will look for properties close to where they live with the benefit of being able to keep an eye on it. But an investors’ hometown might not be the best area – instead look at places with the right amenities for your tenants such as transport links and good schools.
It’s also worth looking at properties that are in need of a cosmetic revamp to help boost investment. Tired properties will sell for less, with the potential to make your mortgage smaller and your returns even greater.
Before making a decision it’s wise to make yourself fully aware of both the pitfalls and triumphs of property investment – research is key in making a return and will stand you in good stead to further develop your property portfolio.