When it comes to property investment we see first time investors make the same mistakes time and time again so here are some important points to consider when making your first forays into the muddy waters of property.
Every time I speak to a new investor they all seem to focus on one thing, the yield. And from the outside this makes absolute sense, you want your investment to give good returns and grow over time, otherwise you might as well keep your money in a bank! But often just chasing the best yield can lead to disaster.
If an area is renowned for providing good yields you won’t be the first to take advantage of this and this is where the other considerations come in. How many rentals already exist in the area? Are they all rented out and if not, how long are they taking to rent out? Some areas now have more rentals than the market requires and whilst the potential yield is great, the difficulty of finding tenants and the downtime between tenants will rapidly empty your pockets whilst the property sits empty
So here are some important tips to make sure you are making the correct investment.
What condition is the property in?
It is great to buy a tired property and do it up for a quick resale, but when you are planning to turn it into a rental it doesn’t seem necessary. If your goal is to get tenants paying rent you want the minimum of downtime from purchase to let. Consider buying a property that is in better condition that way you will have fewer nasty surprises.
Rentals have more regulations than you can shake a stick at so make sure any property can cover these as easily as possible. Electrics, boilers and energy performance rating are but a few of the aspects of your property that have to meet a set standard to rent out.
Local rental market.
Considder who is looking for rentals in the area. You don’t want a property next to a university if you don’t want to rent out to students, conversely you don’t want a 9 bed student house share 5 miles away from campus.
Future development plans.
Find out what plans there are for development in the area. Is there a new business park planned nearby? Is it near the proposed route of the High Speed 2 Line? Any of these things can both increase the property’s sale value and also your rental potential.
Some areas around the UK require you to register your rentals through a landlord certification scheme. These can cost as much as £700 per property and along with other overheads such as Gas safety checks, fire safety checks and many other requirements you need to plan a budget to get these covered.
All eggs in one basket.
Why spend your whole investment on one property if you can stretch to two cheaper ones? By spreading your investment it smooths out your returns and means that when one is empty the other can still be bringing in an income. Also consider investing in HMOs (Houses of Multiple Occupancy). With HMOs again, when one tenant moves out you still have the income of the others to smooth over the down time for that room.
There is so much to consider when investing in the property market and I could go on and turn this into a book (perhaps I will) but if you want any more information then check out our website or give us a call. Our resident investment expert will be happy to share her knowledge with you.