If you are considering purchasing an investment property, it is essential that you take the time to identify the type of property which meets your investment needs. This guide will explain how to locate the right area, the correct type of property and suitable tenants.
Choosing the right area
As the old adage says, when it comes to property, the key factor is ‘location, location, location’. There are many factors which affect the desirability of a location, such as transport links, access to schools, regeneration projects and average property prices.
If you are planning to buy a property outright so you can generate income via the rent, you may wish to buy in an established property hotspot, as these areas will bring in the highest rents. However, if you wish to invest in a property so you can make money as house prices increase, you should aim for an area which has lower property prices, but which is a potential hotspot where those prices are likely to rise.
Thinking about tenants
While there isn’t a ‘typical tenant’, it is possible broadly to group tenants by their different expectations and needs.
- Prime market tenants - This is someone who has a high-level job, such as a doctor or corporate manager who will only be staying in the UK for a short period while they carry out their work. These tenants will want a high-end property which is located in a desirable place. While they are likely to pay high rents, the transient nature of this tenant group means your property may be empty for some months of the year.
- Professional tenants - Professional tenants are typically young middle-class people who are looking for somewhere to live which allows them to commute to the nearest city, and who cannot yet afford to buy their own property. These tenants typically favour new build or large Victorian houses.
- Students - Many bigger cities now have large student populations. Once students move out of halls, they will typically look for a house. While student rents generally are lower than average, this is often offset by the fact that student houses are normally in less desirable and therefore cheaper areas.
Choosing the right property type
When buying to let, you should forget about your personal preferences. After all, it isn’t you who will be living in the house! Instead, you should focus on how desirable the property will be to your prospective tenants.
When looking at properties, there are a few points you should keep in mind. As a general rule, the older a property is, the higher any potential maintenance cost may be. As the property owner, it is you, not your tenant who is responsible for any maintenance work.
New build properties will typically have lower maintenance costs. However, you will probably have to pay more during the initial purchase.
While being close to transport links is a plus, if the property you are planning to rent out is very close to a motorway, railway line or on a busy main road, the noise may put potential tenants off.
Properties that are near good schools will always fetch a premium and are more likely to attract young families who, unlike prime market tenants or proffesional tenants, are more likely to be long term terms reducing your void periods.
For more help identifying a suitable investment property, contact us today.