So you’re interested in buying an investment property and are looking for buy to let advice before you move forward? Buying your first rental can be an incredibly rewarding and profitable venture when done right and is a great way to make money through property, but there’s no doubt that there are certain criteria you should think about before investing. That’s why we’ve put together this helpful ‘buying an investment property checklist’ for you to follow, with information on what to know before buying a rental property. If you want to know what to look for when buying an investment property, take a look at these fourteen things to consider.
Where is it?
The location of the property you end up buying plays a big part in the overall investment. Is the property in a city that’s made headlines for good or bad reasons? Is the area the property is based in your own city or a city close to you? Or will you need to travel far to scope out the area and view the property or its building site? For the right investments, travelling shouldn’t be an issue, but it’s always worth considering the impact the location will have on you and your venture.
How much is it?
This is an obvious one, but the cost of the property is a big thing to think about when buying an investment property to rent. You need to be able to afford the property, so you should rule out any overly pricey investments until you have the funds to cover them. Remember that it’s not just the initial property price you need to think about, as owning a rental property comes with other expenses like taxes and possible maintenance costs. Make sure you factor in all the costs involved to be sure this is the right investment for you.
What are the average yields for the area?
No investor should consider purchasing a buy to let property without first knowing about the potential rental yields that come with it. Research the average rental yields of the area to get an idea of what you should expect. Alternatively, if you’re investing with a property company like RW Invest, this information will usually be provided for you, making this task a lot easier!
Do property values increase in value in the area?
To get the most out of the investment in terms of capital growth, property values are key in what to look for when buying an investment property. Look at property values in the area and find out information on the past purchase price of properties compared to the price they are today. UK property market predictions can also be a great way to gain buy to let advice with the click of a button, giving you an indication of possible house price rises in the area and letting you know if a big return on investment is expected.
What’s the surrounding area like?
Not only do you need to look at the city your investment is in, but also the area itself. Pay attention to the surrounding area of the property and the kind of attractions that are nearby. Owning a rental property near things like transport links, restaurants and bars and often green spaces can all increase your chances of a lucrative investment. On the other hand, if the property is located in a run-down area with little chance of regeneration or improvement, this could negatively affect you in terms of capital growth and the level of demand for rentals you receive.
What type of property is it?
When it comes to what to consider when buying an investment property, the property type itself is one of the main contenders. Is it a house or an apartment? Is it a residential property or targeted to students? You’ll have a good idea of what type of property you’d prefer to purchase, so decide whether your choice meets this requirement.
How many bedrooms?
Is it a studio, one-bedroom, a two-bedroom or three-bedroom property or more, and how does this align with your strategy? If you want to rent to one tenant, a one-bedroom is typically fine and the more affordable choice. Whereas, if you want to rent to a young couple or family, more bedrooms are usually needed. Students, on the other hand, are more willing to rent a studio apartment.
Who’s your target tenant?
What type of prospective tenants do you envision living in your buy to let property, and would they be happy to stay there? Everything from the property type to the decor style should be considered to ensure the property is as attractive as possible to your target tenant. This is important to find out before you make your purchase as you can focus on finding a property that fits your criteria, such as an apartment in the city centre for a young professional tenant or a property with high-speed internet connection for a student tenant.
Is it off-plan?
Off-plan properties are becoming more and more popular in the buy to let sector, providing a number of benefits like below-market prices and the possibility of high capital appreciation. If you’re not sure whether the property you’re interested in buying is off-plan, it’s crucial that you find this out. Off-plan property investment works differently to other types of investment in property such as refurbished properties as the property’s construction hasn’t completed yet. Therefore, you won’t be able to view the finished property before you buy it and will need to rely on technology like computer-generated imagery and virtual reality to see the expected outcome.
Do you feel confident in the investment?
Before buying an investment property, you want to make sure you feel completely confident and happy with the property you’ve selected. This means being happy with both the property itself and the location and cost, along with having a generally good or bad feeling about the investment. If you’ve done your research and think that this property fits your criteria perfectly, you’re on the right track to a happy venture.
Do you trust the investment company?
Along with being confident in the property itself, another tip for investing in rental property for beginners is to also be happy with the company you’re buying it from if you’re investing with a property investment company. You should be impressed by the initial process of enquiring about the property, and feel that the company is knowledgable and trust-worthy enough to proceed with. Take a look at any company reviews which can give you a better insight on this and learn about the experiences of past investors.
How are you paying for the investment?
If you don’t already know how you’re paying for your investment property, you’ll need to decide this. You might want to buy the property with a buy to let mortgage, in which case you should find out if this is possible before taking the next steps. Some investments, such as off-plan properties, don’t typically allow buy to let mortgages to be used. If you’re buying an investment property before your first home, you’ll also be unable to use a buy to let mortgage, along with some other restrictions that are in place.
Do you have an exit strategy?
Lastly, once you’re happy with all aspects of your buy to let investment, make sure you’ve created a suitable exit strategy. Your exit strategy looks at how you will end the investment, whether this means selling the property when the market is at its highest point or holding on to it until retirement. When buying an investment property to rent, having both a property investment strategy and an exit strategy is crucial to your success.