Purchasing a Buy to Let: Top 10 Things to Consider

Top 10 Factors When Purchasing a Buy to Let Property

1 | Location

That age old adage ‘location, location, location’ has and remains one (or three) of the founding principles of property investment. The location of your purchase should be at the forefront of your mind during any property search. If it is not, then you might just live to regret it.

Many of the factors below make up the overall location factor. However, it is important that you consider it as a whole when choosing a particular buy to let property.

2 | Quality

When choosing a buy to let property to purchase it is important that you are confident with its quality. This is crucial for two reasons in particular. Firstly, a higher quality property will tenant easier as people prefer a good standard of rental property. This is especially true as homeownership continues to decline and people are renting for longer. As young professionals begin to achieve higher salaries, they look for higher quality properties to rent.

Secondly, a higher quality property will cost less to maintain. A buy to let property is an investment and any maintenance will impact the returns it can achieve. Purchasing a low cost property might initially seem like a good investment, and this might be the case. However, should it be low cost because it has hidden improvement requirements then you could make a significant loss. When purchasing a buy to let property there is a clear balancing act between the price and the quality of the property.

5 | Regeneration

The regeneration factor is absolutely crucial to any property’s capital growth prospects. Investing in property in areas undergoing large-scale regeneration can prove to be some of the most lucrative investments. This is because these areas, by their very nature, are being transformed from run down to attractive. Large public and private investment will see businesses and hospitality move to the area, increasing tenant demand. Furthermore, new public spaces, attractive architecture and useful amenities will increase an area’s curb appeal.

Regeneration will have the effect of increasing the value of your buy to let property. Sometimes at astonishing speed. The best part of this is that you do not need to spend a penny to see this return. It is important to get in early as lower priced properties within regenerating areas are snapped up very quickly.

It is advisable to check planning portals in your desired cities. From there you can check the status of planning applications. Getting in early will allow you to achieve the most attractive returns from your buy to let property.

6 | Job Market

The strength of a job market in any given town or city has enormous consequences on its overall prosperity. It also has tremendous effects on an area’s property market. When choosing where to invest you should strongly consider the employment rates of the area, the calibre of employers that are located there, and salaries that are achievable.

A strong employment market with high salaries helps drive up rental prices as more young professionals move to the area. Furthermore, a low employment rate reduces the chances of tenants going into arrears. Arrears and void periods are both important factors that all landlords must account for when investing in buy to let property. Mitigating this risk can provide that much-needed investor confidence.

9 | Charges

The buy to let rental market is quickly becoming dominated by apartments because of their strong returns and high demand. Apartments are almost always leasehold properties as apposed to Freehold. Leasehold properties will be subject to additional charges that must be accounted for when purchasing as they will impact your returns. The two main charges will be ground rent and service charge, and these can differ enormously depending on what development you purchase in.

Service charges will be based on the cost of running and maintaining the building and communal areas. They therefore increase depending on the facilities your tenants benefit from. Of course, much of these are covered by the higher rents you will be able to charge.

Ground rent, on the other hand, is rent that is paid to the owner of the freehold. It offers no tangible benefit and should be viewed with caution. Ensure that any buy to let property you consider purchasing has ground rent around 0.1% of the purchase price. Specifically, you will want to stay clear of buy to let properties that have doubling ground rent.

10 | Property Management

Finally, but no less importantly, you will need to carefully consider how you will manage your buy to let property. Should you wish to manage it yourself it would be wise to look for buy to let properties within a reasonable distance of your home. A buy to let property the other side of country and managed by yourself can turn into a nightmare.

At CityRise we recommend using professional lettings and management services and avoid doing it yourself. By selecting a reputable agent, you will achieve higher rents, lower void periods and your tenants will be looked after 24/7. However, you will want to ensure that management costs are reasonable and do not eat into the monthly rent. Find out more about CityRise lettings and management services here.