It’s a popular sector for people to get into, and can be a fruitful one too, but the world of buy-to-let can also be confusing and overwhelming at the same time, especially if it’s a new venture.
If you are keen to enter the buy-to-let market, take a look at our helpful pointers that will help to make the process a little easier, and more appealing.
Research is essential
If you are wanting to purchase a buy-to-let property then you should use the knowledge available to you in regards to the local market, and there’s one rich source brimming with essential information, your local estate agents. Here at Howes, we have a wealth of knowledge and background experience that we can help you out with. With Howes estate agents, North Devon, and Mid-Devon are areas we’ve got years of experience in, but we’d advise you ask any agent the following key questions:
What is rental demand like?
How quickly are properties being let?
What is the average rent in the region?
What types of property are popular with tenants?
What is happening in your area? (This can refer to developments etc.)
By collecting answers and background information on all of the above questions you’re arming yourself with a strong indication of the types of returns you can expect to receive.
Remember to also ask whether there are any plans that might allow for potential future house price inflation. For example, there might be plans for new transport links, or infrastructure in the pipeline within the area, and this is something that could have a significant positive impact on the desirability of the location for people wanting to potentially live there.
What is your motivation?
You need to ask yourself, “What is my motivation for investing in property?” It’s an important question you need to figure out. Are you looking to secure a regular monthly income in the now, or in the future, for example?
If the answer you have is for the now, then it’s essential to be clued up on the kind of revenue a property might produce for you. You can work this out by dividing the annual rent you will receive by the value of the property.
Take, for example, a property worth £200,000 which you let at £10,000-per-year, the gross income would be 5%.
On the other hand, if you’re being long-sighted and it’s an increase in the value of your investment over the longer term you’re after, you need to ensure you are on top of how general house prices fluctuate over time. Another factor you need to take into account is whether there are any demographical dynamics or plans for investment in the area that could influence the values of property in the future.
What type of property are you thinking of buying? Do you want to acquire a house that needs ‘doing up’? If so, you’ll need to take into account that you are going to have to do the work, or pay someone to do the work for you. Renovation projects are often a popular choice in the market, due to the fact that they have the potential to add value to the property by the time refurbishments are complete.
Alternatively, there are many people who would prefer to make a purchase on a build that requires little or no work carried out on it prior to the tenant moving in, that way the property is ready to move in almost straight away.
Who do you want to rent to?
Finally, you should think about who you want to rent your property out to. Are you aiming for professionals to occupy the property, or do you have plans to let it out as a holiday home, for example? Talking to professionals, such as ourselves at Howes, will give you a clear understanding of what various types of tenants would expect when it comes to the property, and furthermore, if you’d be wiser letting the property furnished or unfurnished.