How to Choose the Right Property to Let Out
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At the centre of all successful property investment strategies is choosing the right property to let out. But there can be a little more to this than initially meets the eye.
There are a lot of factors to consider, not only in terms of figuring out how to make money from property, but also how to make a buy-to-let investment that generates a lucrative and reliable source of income over time.
In terms of durable and long-lasting investments real estate in the UK is traditionally one of the strongest and most reliable strategies.
However, it’s important to be aware of the factors that will help you choose the right investment property to put on the rental market.
Always remember that you want your property to attract consistent tenant demand in order to minimise void periods so naturally, things like rental yields, location, apartment spec and residential facilities should be hot on your radar as an investor.
For reference, keep these points in mind:
- Strong Rental Yields
- Desirable Location
- High-Quality Property
- Target Tenant
Of course, there are other things that come into play and it’s almost guaranteed that you’ll encounter these at different points in your investment journey. But as a rule of thumb, keeping the above points in mind while searching for the right property won’t lead you far wrong.
Why don’t we take a closer look…
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Rental Yield
Put simply, in the world of buy to let property, your rental yield is your return on investment.
This is the clearest indicator of what you can expect to earn from an investment, making it one of the most important factors to consider.
Rental yields can vary significantly depending on things like the quality of the property, the range of facilities available to residents (if it’s part of a larger development) and of course, the location.
What Is a Good Rental Yield?
So, what is a good rental yield and what sort of rental income can you expect from a UK buy to let property in 2023?
A solid rental yield typically sits at around 6%, which is a return that can be expected from most central city districts in the UK.
According to the most recent house price index, the average UK rental yield is 5.08%, so if your property is hitting the 6% mark, then it’s generating a solid return.
Depending on the quality, location, residential facilities, and investment type, however, higher rental yields are more than achievable in key UK cities.
The brand new Rice Works Liverpool development, for instance, has the potential to generate returns of up to 15% thanks to its premium location along the city’s waterfront and the C1 planning consent that enables each apartment to be rented as a short-term let – another highly lucrative investment strategy.
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Location
As mentioned above, location is key to finding a high-income property to let out and there are some that stand above the rest when it comes to buying rental property in the UK.
In terms of both property and rental value growth, the North West is currently going from strength to strength, with experts predicting the region to continue performing well over the next five years.
A key driver behind this expanding regional market is Liverpool, a city recently voted the best place to live and work in the UK and one that is the target of several multi-billion pound regeneration projects like the Liverpool Waters Scheme.
Rental yields in Liverpool city centre have the potential to reach as high as 8% and with a growing portfolio of exceptional residential developments, there is a wide variety of lucrative Liverpool investment opportunities on the current market.
On average, property prices in Liverpool also sit below the UK average and are expected to increase by as much as 14.5% by 2026, presenting a lucrative exit strategy for anyone who invests in 2023.
Obviously, Liverpool isn’t the only city in which a great investment property can be purchased. Similarly, investments in London and Manchester – the North West’s other economic powerhouse – present some world-class buy to let opportunities.
But in terms of what to invest in right now, rental property in Liverpool presents some of the most promising opportunities out there.
High-Quality Property
When choosing the right property to let out, quality is key. While a property may be in a perfect location that has excellent capital growth potential, it will not attract consistent tenant demand and importantly, yield high returns unless it is of a certain standard.
With this in mind, it’s essential to ensure that the property you decide to invest in is of a quality that justifies a good rental income, one that makes the investment worthwhile in the long run.
A good starting point in this regard is carrying out sufficient research on the property developer. In popular cities like Liverpool and Manchester, the majority of quality investment properties on the market are part of larger developments located in central districts.
Oftentimes, these developments are in construction when the properties go on sale, which is referred to as off-plan property. While this usually enables investors to purchase properties for below-market value and is a great investment strategy, it’s important to have confidence in the developer before making any financial commitments.
Having a look at a developer’s portfolio or even getting in touch with a property investment company that’s worked with them in the past and organising a viewing is an excellent way to determine whether the property you want to invest in will be of a high standard once complete.
Today, in addition to high-quality living spaces, top rental properties usually come with access to a range of on-site facilities such as:
- Fully-Equipped Gyms
- Swimming Pools
- Spa
- Residents Lounges
- Roof Terraces
- Concierge Services
Target Tenant
Let’s not forget about the tenant…
Like every business has a target market, every rental property has a target tenant or tenant group. Whether your property appeals to a diverse tenant base or to a select demographic like student residents, it’s important to have some idea of who might be living there when making that final decision.
The factors outlined above will also play into this significantly.
If for example, you’re looking to make an investment that appeals to the growing young professional population in a city like Liverpool, choosing a property that’s close to a variety of employers will be important.
Additionally, residential facilities like swimming pools, gyms and remote working facilities are likely to appeal to a younger tenant demographic.
It’s also useful to remember that not all buy to let properties have to be rented out to a long-term tenant. In fact, properties that have C1 planning consent like those in the Liverpool Rice Works development have the potential to generate huge returns when run properly and in the right location.
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Why Choose Buy to Let?
When it comes to the top passive income ideas UK buy to let property has proved one of the most stable during challenging economic periods like the one we currently face.
Although mortgage and inflation rates are at record highs, there remains a supply and demand imbalance across the UK that makes rental property an assured earner; particularly when many first-time buyers are deciding to hold off for the time being.
From an investment perspective, it’s also important to understand that current interest rates can easily be avoided by investing in off-plan property, which doesn’t require a mortgage until the development in question is approaching completion.
Additionally, 2023 presents a unique and potentially lucrative opportunity to invest in buy to let property. This stems from the dip in property values that have characterised the UK market this year due to rising mortgage rates and a prolonged cost of living crisis.
At present, property prices are generally lower than they have been at any time since the pandemic. However, according to the latest mainstream regional market forecast, these values will again begin to rise over the next year, with regions like the North West set to grow by up to 11.7%.
Rental values are also set to rise as demand for property in rapidly growing and more affordable UK cities continues to increase. Sticking with the North West, key cities like Liverpool are expected to experience rental value growth of at least 10% between now and 2026.
How to Invest in Property UK
Making the right investment can be difficult. Determining the right location, the right individual unit and the right time to make that purchase requires a lot of careful thought and due diligence.
In this regard, seeking expert advice can be an invaluable step toward choosing the right property to let out.
Therefore, when considering exactly how to invest in property UK property investment companies can guide you through the entire process and ensure you get exactly what you’re looking for!
Contact RWinvest today to begin your UK buy to let journey with our range of lucrative investment opportunities.
Reece Pape
Reece Pape is a property writer at RWinvest. Reece is passionate about keeping property investors updated on must-have information and housing market news, utilising the latest property market statistics and data.
