If you’re thinking of making a new buy-to-let investment this year, you may be wondering if there are any particular types of property or ‘hotspots’ you should be considering – locations where prices are predicted to rise quickly and where rental returns are well above average.
Of course, every investor would love great capital growth and high rental profits! However, we find that’s pretty rare, and most landlords either do particularly well with just one of those or, more commonly, get well-balanced returns.
Although there may be a few locations where there’s huge demand and a lack of supply for a particular type of rental, it’s important to take a long-term view with property investment. The reality is that no matter where you invest and what type of property you buy, the market naturally rises and falls over time.
So, rather than spending months hunting far and wide in search of today’s ‘best possible’ deal, we’d say the key to success in buy-to-let is finding a ‘good’ deal that will give you consistently decent returns over the long term.
And we can help you do just that!
Whether it’s your first rental property purchase or you’re adding to an existing portfolio, here are our top tips for finding a solid investment this new year.
Invest close to where you live
You can find a thriving lettings market in pretty much every town and city in the country, with prices and rents varying according to the type and exact location of properties. So, unless you live in a remote or very rural location, you should be able to find a good investment – one that will deliver above-average returns – within around half an hour of your home.
There are several benefits to investing close to where you live:
- If you buy in an area that’s already reasonably familiar to you, you’ll have an awareness of property prices, how good the local economy is, transport links, etc. – all the things you need to know to properly assess a buy-to-let investment. This is especially valuable if you’re planning to build a portfolio.
- It’ll be easier for you to view properties at short notice – remember, the best ones often go quickly! If estate agents know you’re local and will respond to them right away, they’ll be more likely to call you first when they take on a new listing.
- It’s easier to build relationships with local professionals that you’ll need to support you in your landlord journey, such as estate and letting agents, surveyors and contractors.
- You won’t have far to travel if you need to deal with any potential challenges at the property.
- Even if you choose to have the property fully managed by an agent, you’ll be on hand to meet periodically with the agent in person and can pass by the property every now and then to make sure it’s being looked after as you’d expect.
Take advice from local letting experts
Success in buy-to-let relies on good tenant demand, so you need to be as sure as possible that the property you buy is in a location and of a type that people will always want to live in.
That means, rather than looking at properties for sale and trying to decide what you’d like to own, a better approach might be to start with what tenants are looking for. Usually, the best place to find that information is a good local letting agent – someone who’s dealing with tenant enquiries every day.
So have a chat to a few agents about what the demand is like locally, and find out which properties, in their experience, usually let quickly and for an above-average market rent. Also, are there any specific types of homes to let that they’re short of? For instance, if there’s always a real lack of supply of three-bedroom homes with off-road parking, that might make a great investment for you. When certain homes are in short supply and you’ve got multiple tenants queuing up every time one comes onto the market, that boosts the level of rent you can charge.
It’s also helpful to find out about different tenant types and where they tend to want to live. If there’s a university or college in the area and you’re interested in letting to students, are there specific roads they prefer? What’s considered ‘desirable’ for young professionals, and where’s popular for families? Pick the brains of these rental experts so you build up a great picture of local demand – then you can focus on satisfying it!
Consider future supply and demand
You can visit the local council office – or online planning portal, if they have one – to see what’s planned for the next five years or so and where any inward investment is going to be made. If there are going to be new shops, restaurants, transport links and employment opportunities from companies moving to the area, that’s a good sign that both property prices and rental demand in the area will increase.
Importantly, check what kind of new builds are in the pipeline and exactly where they’re going to be built. If you’re thinking of investing in a two-bed apartment and there’s going to be a flood of them hitting the market in the next few years, what kind of impact is that likely to have on the price and rent of your property?
Experienced letting agents should be aware of upcoming developments and how they could affect the local property market, so it might be beneficial to ask their opinion on how they expect things to change over the next five to ten years.
Choose a property that gives you flexibility
Once you’ve got a good idea about what types of property in which specific areas are likely to make solid investments, try to find something that gives you options for the future. Right now, it might suit you best to let a property to a family looking for a three- to five-year rental. But if there’s a shift in demand down the line, would it be fairly easy to turn it into a multi-let? Or, given our ageing population, are there currently bedroom, bathroom and kitchen facilities on the ground floor, or could the property be easily adapted to offer to older tenants?
Will the property satisfy your investment goals?
The final thing to bear in mind is that what makes a ‘good’ investment can vary from one landlord to another – it depends on your investment goals. If rental income is your main priority and you plan to sell the property in 10–15 years’ time, a House in Multiple Occupation might be the best option. However, if you’re investing so you have an asset to pass on to family members and you want something that’s easy to manage yourself, a small family home might be the best option.
Given all the different things there are to consider when choosing a buy-to-let investment, it’s important to talk through your plans with professional experts who are experienced in helping landlords. They can discuss your options and give you the knowledge you need to make the best decision for your own circumstances.
At London Executive we’d be delighted to discuss your investment goals and can help you find local properties that are most likely to deliver the returns you need – both now and into the future. Give us a call on 020 7048 0400 or email firstname.lastname@example.org and we’ll get right back to you.