Property Expert Nicholas “Nick” Statman on spotting profitable buy-to-let properties:
There is no secret formula or special checklist that can define the perfect buy-to-let property. The right property depends on your experience, your expertise, your budget, and your financial goals. While a three-bedroom flat in London might be the perfect investment property for you, someone else might need far less space or a completely different location.
The perfect buy to let property for you will be based on these four things:
The right property for you will cater to the specific buyer that is most likely to rent in your area. For example, if your property is located near a University and in a neighbourhood popular with University students, you will want to find a property that is conducive to this type of tenant. This means looking for a multi-bedroom flat or single-family home that could accommodate roommates, has room for an office, or is close to public transportation. Check out other properties that cater to university students and compare your property with theirs in terms of monthly rental rates and amenities. If the property you’re looking into doesn’t cater to the type of tenant that is most likely to be interested in the property, it may not be the right buy-to-let property for you.
Your rental yield is your annual rental income, as a percentage of the total value of the property. To find the rental yield of a property you must first calculate the annual rental income for that property. Then you divide that number by the property value. Lastly, multiply that figure by 100 to get the percentage. For example, if your annual rental income was £12,000, and the property was valued at £200,000, your rental yield would be 6%. This could be considered average in some areas and low in others, just depending on where you purchase your property and the condition of the local property market.
Potential To Add Value
There are two types of investors: One that looks for properties that need a lot of work, and one that looks for properties that need very little work. Choosing a property that requires minimal repairs means you’re ready to jump from buying to letting in a short amount of time. This also means you can start earning money faster. But homes that need considerable repairs also have the potential of increasing their value. Sometimes, just a small refurbishment (£3,000-£7 pounds) could dramatically increase the value of the home and your return.
If you have the resources, expertise, and experience to complete the necessary repairs, a home that needs to be refurbished may be an opportunity to increase your return. If home repairs are not your specialty, the right buy-to-let property will require very minimal maintenance.
It’s not an industry secret that location plays a significant role in how successful an investment property will be. The perfect buy-to-let property will be in an area that has both homeowners and long-term renters. It can be hard to determine how an area will grow in 5-10 years, but choosing an area that seems to be growing and evolving will usually work in your favor as an investor. Look for highly sought after cities and then broaden your search to areas just outside to neighbouring suburbs. You may be able to find affordable properties in an area that might be next in line for development. Of course, properties zoned for good schools and those in areas with low crime are usually popular with tenants and, therefore, smart investment options.
There are a lot of benefits to investing in buy-to-let properties. They allow for long-term investment and growth, generate a significant income, and many of the costs associated with this type of property can be offset against taxes.
There’s no way to define a perfect by to let property, but if the property aligns with your financial goals and looks like a profitable investment when all four of these features are considered,, then chances are it is the right property for you.
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