"As well as a strong rental yield, investors will look to benefit from their investment long term by taking advantage of rising house prices"
There are many times our team have been contacted by first time investors who are either wanting to invest close to their own home or are unsure of where to invest.
We’ve often touched on the key locations for buy to let, but it’s important to stress why location is the number one thing to consider when investing in property. It’s a message we have been repeating since day one and with good reason. It’s understandable that first time investors are wanting to invest in their hometowns, but this isn’t always the savviest way of maximising returns on the cash you invest.
Consider buy to let as a business; decisions need to be logical, not emotional, in order to produce the best returns. Unlike buying your own home where you reside permanently, what you look for in your own property may differ from that of an average tenant.
Here’s why investing in your hometown may not be the best route:
- You’ll be chasing a combination of high yields and capital growth. Unless this is found within your locale, it’s wise to look elsewhere.
- If you’re looking to target young working professionals, a 3-bedroom house in the countryside isn’t going to meet your target market requirements. Consider a city centre buy to let or somewhere in a commutable area with good transport links. This will keep void periods to a minimum.
- Amenities are key to a happy tenant. Somewhere with plenty on the doorstep including public transport facilities.
Some of the common concerns we often hear when investors are considering investing in a different area to where they live include:
- ‘How can I manage a property when it’s so far away? I’d like to keep an eye on my investment.’
- ‘How do I find out if there’s a high tenant demand so I can make sure renting isn’t a problem?’
- ‘How do I know where is best to invest? I only know average sales and rental prices in my area?’
Here are some main things to remember:
Be a ‘hands-off’ investor
Experienced landlords know that a great letting agent is key to the success of their investment. Having an agent by your side eradicates the concerns of being close to your investment property – they’ll do regular checks on your asset (and your tenant) to ensure that everything runs smoothly and you reap the financial rewards. There will very rarely ever be a need for you to visit the property yourself. As a matter of fact, many of our clients have never even been to see their investments themselves. Over 60% of Sequre’s clients are based in the south of England, yet buy property in the north for this very reason - not only are the returns better but they can relax knowing that a letting agent is taking care of everything on their behalf.
Follow the tenants
If you have bought your own home, it’s likely that you’re living in an area surrounded by other buyers as oppose to tenants and rental properties. Whereas a buyer may look for large garden space, a certain number of bedrooms and a driveway, the type of tenant you’ll want to attract may look for a property close to transport links and local bars and restaurants. Tenant demand is key to any investment, as you want to purchase in an area that sees a high influx of renters to reduce void periods. If you do your research on buy to let property, you’ll find numerous deals with are already tenanted, resulting in an income-generating property investment from day one.
For example, our advisors at Sequre will always provide prospective investors with a detailed financial breakdown of the investment structure, rental prices and demand in the area. This allows you to make an informed decision on where to invest, along with a detailed breakdown of your returns. Make sure you obtain this level of detailing from any agency you approach before continuing with your purchase.
Keep an eye on house prices
Capital appreciation is another element you’ll likely want to consider when purchasing a buy to let property. As well as a strong rental yield, investors will look to benefit from their investment long term by taking advantage of rising house prices. If you live in a quiet, sleepy village, property prices may not grow as fast as they would in more progressive areas of the UK’s city centres and trendy suburban towns.
In Manchester alone, house prices have risen an impressive 8.4% over the last 12 months, so investors in these areas will certainly reap the most benefits. Again, a great agency can steer you on likely house price rises so you can consider this before making a purchase. An agency who is really switched on can also help you track down a future hotspot so you can invest whilst prices are low.
They’ll already be on the ball with public and private investments into certain towns and cities which are just the beginning stages of spotting an up and coming location – it’s definitely wise to do your research as it’ll benefit you in the long run.
While it’s always important to pick an investment choice that best suits you, there is no “one size fits all” when it comes to buy to let. For those looking for a complete hands-off investment that provides maximum income, it’s vital to carry out the necessary research on your future buy to let purchase and take note of how location and well-known ‘tricks of the trade’ can make a significant difference to your returns.
