This is where many investment property buyers go wrong, choose the wrong property and it will become a headache, but if you choose the right property you will have a profitable property for the future. The key factors to consider for selecting the property are the location and the type of property.
Location of the property –
This is all to do with market supply and demand, you need a property in a location where there is a current and (expected) future demand from tenants. A property in a small rural village is unlikely to have much demand, likewise an over-developed city or town centre with excess supply of flats is not going to be good either.
Ideal locations are near to public transport or good road access for getting to work. Local facilities also need to be considered such as schools, shops, and leisure. Ask yourself the question, “could I live here?”
You may also be interested in student multi-lets, locations near universities and colleges. Make sure that the location is in an area where the university campus is going to remain for many years to come – some universities have campuses in multiple locations, if they consolidate locations you could find yourself with no students to rent to.
Consider the local economy, is there a single major employer for the area such that if they were to close down there will be high unemployment? This is difficult to gauge but it is really important to factor in, get it wrong and you may struggle to let out your property.
Type of property –
Many landlords have been taken in by builders in recent years offering flats with rent guarantees for 2/3 years, then finding out later there is an over-supply of flats and market rents fall. You need to assess the local market and ensure your type of property is in more demand for renting. Note that over the last few years many flats have been built, often creating an over-supply, thus you may find small 2/3 bed houses in greater demand.
If you choose a flat, which can be a great investment in locations such as London, then you need to consider the costs for ground rent and service charges. Sometimes these costs can be disproportionately high when compared with the equivalent sized house, thus eating in to your rental profits. On the positive side flats require less hand-on maintenance by the landlord as all main buildings work is covered by the freeholder’s management company.
This is a very brief overview on selecting a buy-to-let property, but equally it highlights very important factors, choose wisely and you will have a profitable buy-to-let property for the future. Our next article in this series will cover some of the key financials for proeprty buyers.
