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The 7 key things you need to consider when choosing a buy-to-let property investment

22 Aug 2013

Recently we've had a lot of landlords come to us to source property for them. What they're looking to tap into is our knowledge and expertise of how to find the right buy to let property.

So, what are the 7 key things you need to consider before investing in a good buy to let property?

1. Look for property in up-and-coming areas

It’s fair to say that an unfailing truth of successful property investment is Location, Location, Location, but this doesn’t mean just buying in the most popular areas (which are normally the most expensive). Instead it is about researching potential areas and finding out what the current and on-going demand is for both the rental and sales market. The basics of a good investment are to buy low, sell high and to get the best rental possible in the meantime, but the reality is that there are far more variables to consider, so research and expert advice are the key.

1 bedroom flat for sale in W7 Northfields
With the completion of Crossrail in 2018, Hawell W7 has been tipped to become a very hot area with increased demand – flats like this beautifully decorated one bedroom for sale in Laural Bank Villas are set to become increasingly popular

If an area is undergoing regeneration or major improvements, if it offers good commuter links or an on-going pull to potential tenants and buyers – such as large local employers or great schools – then you have found a good place to invest.

2. Choose the right type of property in the right area

Once you have highlighted the right area, you’ll need to identify the best type of property. A one bedroom flat in an area popular with families, or a family home in an urban young professional area will leave you with a problem. The easiest way to find out which is the best type of property for letting is of course to talk to a lettings specialist. Many investors are caught out by highballed rental estimates from sales agents keen to close a deal, so independent advice is a must!

two bedroom flat for sale in Endsleigh Road W13
This two bedroom property for sale in Endsleigh Road in Ealing will attract professionals due to its high end finishes and German crafted kitchen

3. Be prepared to re-decorate

Despite the overwhelming demand for rental property it is important to remember that tenants take their choice of property seriously and if they plan to rent for an extended period of time they will want something well-presented and well maintained, so be prepared to make cosmetic updates to a property to ensure a fast let and the highest rental income.

2 bedroom flat for sale in W13 Ealing Northfields
This two bedroom, two bathroom apartment currently for sale in Ealing has been neutrally, but attractively decorated and would attract tenants

4. Consider cost v. return

Like any investment you need to consider the costs involved verses the potential return and of course with property there is the added confusion of a mortgage. Buy-to-let lenders typically want rent to cover 125% of the mortgage repayments and many now demanding 25% deposits, or even larger, for rates considerably above residential mortgage deals. The best rate buy-to-let mortgages also come with large arrangement fees.

The typical deposit required for a buy-to-let property is currently 20%-25%, but there are some 85% mortgage products starting to emerge. The important thing is to make sure that your investment is not over geared. Whilst with the right property in the right area void periods should be minimal, they are still a risk of any buy-to-let investment, so you need to ensure that your monthly outgoings on the property are manageable during any periods where you do not have a tenant.

5. Don’t be over-ambitious

Property is a medium to long term investment and this is true more now than ever before. Your biggest profits will come from capital growth and this takes time. It is advisable that all buy-to-let investors should look at any property purchase as at least a 5-10 year investment, so if you are expecting to buy an investment property and retire on the profits a year later you will be sorely disappointed. Many people do make a living from their lettings portfolios’ but these are typically built up over time.

6. Be realistic & prepared

As with any investment there are negatives as well as positives and whilst many of these negatives can be avoided with the right planning, research and advice, the property market is constantly changing so you need to be prepared to overcome any obstacles.

We advise all our landlords to have a contingency fund for void periods as well as for any maintenance and repairs that may be needed. By knowing what ‘might’ come up you can ensure you don’t get taken by surprise.

7. Ask yourself "How hands-on do I want to be?"

One of the major considerations when entering the lettings market is how hands on do you want, or have time to be? Some tenancies run smoothly without a single hitch, whilst others can throw up problem, after problem. Lettings is a highly legislated industry with many legal pitfalls that can catch out new and experienced landlords. The easiest solution is to use a qualified and experienced lettings specialist to either manage the property, or at the very least negotiate the tenancy terms and prepare an inventory, then collect the rental throughout the tenancy.

Of course the fees involved in-such a service are greater than if you just use an agent to find you a tenant, but when you have taken so much care to choose an area, find a suitable property, secure the best mortgage deal and attract the best rental, can you really afford to risk the whole investment over what really is a small percentage of the income?

Call us for free advice

Our qualified, experienced and multi award winning team are able to give independent advice about potential purchases in West London, as well as talk you through the more in-depth considerations of lettings. With the right advice and a pragmatic approach it is easy to make a success of property investment. Call us today on 020 8280 9600 for some free advice now.

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