Investing in property is a popular move for many people with spare cash who want to make a good return on their money, as it is regarded as one of the safest and reliable assets. However, it can be challenging getting into the market if you’re new to it all. This guide on buy-to-let (BTL) property investments will help you determine which opportunities are too good to be true and which are too good to miss out on.
A reliable and growing market
When looking for a BTL opportunity, it’s crucial you are confident there will be enough demand for the type of property you are considering in investing in. BTL properties rely on strong interest to ensure they remain full throughout the years, even if tenants come and go.
Therefore, it is wise to see if there is a solid tenancy market in the location you are keen on buying in and for the asset you are considering investing. This will depend on the type of tenant you are hoping to appeal to. For instance, if you’re thinking about letting out student accommodation, you should research into the universities in the area, their student population and whether there is an undersupply of student beds nearby. If there is a significant lack of purpose-built student properties, you have a good chance of finding tenants to consistently keep your asset full.
Alternatively, if you’re aiming at the young professional market, make sure you find out whether the area is home to a strong jobs market, has good transport links and is in a location that has lots of bars, cafes and shops close by.
Just as important as a strong market is the location for a BTL investment. These two go hand in hand, with the best location offering the biggest tenancy market for investors. It is vital you do your research thoroughly into specific roads and locales within bigger areas; for instance, even if you think London offers a huge supply of prospective tenants, in order to get the best BTL asset, you should work out what postcode provides the greatest demand for a property within your price range.
As well as looking at location with regards to market demand, it is also wise to conduct further research regarding rental yields in the areas you are interested in. It is a good idea to pay close attention to whether they offer stronger yields than the national average, and if yields have been growing over the last few months. These are good signs that this location is a strong contender for your new BTL investment.
For instance, LSL Property Services’ BTL Price Index for August 2013 reported the north-west offered the strongest yields in England and Wales (at 7.6%), with this having grown from 7.2% during the same month in 2012; therefore, this region looks particularly promising for a BTL property.
A solid reputation
If you’re considering getting some help with your BTL investment and buying a property from a development company, one thing to make sure of is the firm has a good reputation. Investing in this way can be a great opportunity for you, offering assured returns without the hassle of managing the property or finding tenants to fill the room/s yourself. You don’t have to worry about demand dipping, tenants moving out or rental yields dropping, as good property investment companies have done their homework before pursuing such a development; therefore, they can offer you a lot of reassurance before you part with your cash.
However, like you would when making any significant purchase, make sure you check out the firm first. If other investors have used its services and have positive things to say about it, you can feel more confident about going ahead with the investment. It is also wise to check how much experience the company has in the property investment field, how many developments it has previously sold and whether the research it has conducted matches up with yours, as this will provide you with reassurance that it is a reliable and reputable firm.
A sellback service
Another thing to look for with property investment companies is whether it offers a service to buy back the property or sell it on in the future. If it is confident enough in the asset that it is willing to purchase it back from you or sell it on to others in years to come, this is a good sign that it believes in the product and is assured the market, the location and property type are all strong factors in ensuring high yields and ongoing strong returns on investment.
The national picture
You can research as thoroughly as possible into specific locations and tenancy markets, but it is always wise to have a good idea of what the BTL market looks like on a national scale. Typically, following the economic crisis and the bursting of the property bubble, the BTL sector has fared particularly well, with a growing population of people forced out of ownership or stuck raising enough money for a deposit on a house or flat. Therefore, there is a rising number of tenants forced to remain in the rental market, as a result of tight mortgage restrictions and steep house prices.
This is excellent news for BTL investors, as there is a strong demand for rented property – with this looking set to remain for some time to come. It is a good idea to keep up to date with the national trends with regards to house prices, mortgage restrictions and first-time buyer opportunities, as these can all have an impact on BTL investments, but this asset provides strong and reliable returns and is likely to remain doing so for several years to come – a reassurance that cannot be given with many other investment types.