Want to become a better buy to let investor? Or are you thinking of investing in your first buy to let and starting your property investment journey? We’ve got you covered. Read on for our top three simple tricks to becoming an expert investor in the buy to let sector.
1. The Perfect Price
Price is key when buying a property whether you are going to live in it or rent it out. The latter is part of a business decision, therefore the cost of the property is one of the most important factors as it will determine the basis of your ROI. This element is always in the mind of investors and they often want discounts, asking for as much as they can in advance of purchasing the property. What they often do however, is spend too much on an apartment from the outset. Why is that? Well, it is often asked of us by a client, “I want top floor, river facing with a balcony.” This request is understandable when buying for yourself, as this will be your home, and as such components such as views, balconies, top floor etc are all key, but as an investor you should be focussed on buying the cheapest 1, 2 or 3 bed in a property. Why? That’s simple, when it comes to rentals those looking to rent will rent the best value 1, 2 or 3 bed in a property and will not be prepared to pay a large premium for top floors or balconies or views. Of course you may well say that with all of the above my property will rent well, it would if priced at a similar price or just a small amount more, but remember you may have paid £20,000 to £30,000 more for the same apartment but on a higher floor etc, and to recover that extra cost over a 10 year period you would have to charge an additional £208 per month at least if the difference in value was say for example £25,000. When it comes to renting, this difference in value would mean in most cases your property would remain empty, and you would be forced to reduce the rent to a level that means you will never recover those extra costs. Overall, it makes very little sense to buy the best apartments in a building for rental purposes. Instead, always get the best value units as these you will be able to price these at rent out at competitive levels and achieve your business model goals.
2. Look at the Location
Following on from price, but not necessarily any less important, is the location. In some sense a location does dictate the price you pay, as the more central and desirable areas tend to command the best prices. This is where as an investor you need to decide on timescales, refer back to your business plan, and look to buy in an area where a large investment is taking place, infrastructure changes are occurring, or new businesses are moving nearby. All of these factors will impact and allow you to buy in areas that have lower entry points, but will achieve greater capital growth over a 5-10 year period (these timescales are key for property investment). Remember that connectivity and a central location are still key and the nearer the centre you are, typically the better the occupancy rates and desirability, but also any new area with great connectivity will also create the perfect recipe for a great rental return, and longer term growth.
3. Build a Business Plan
Finally, and something you should build from the get go is a good process. By this, all of your elements should be in place, from funding, to long term strategy. To embark on this journey (and it should be considered this), you should have every element of your business covered off. You need to secure and be able to repeat the funding model, you should know your ROI’s and growth scenarios that you are expecting, you should have taken advice on the best way to build your portfolio, and above all, you should have an independent property broker to help you navigate this sometimes tricky and often bewildering marketplace. What you need is a ‘cookie cutter’ type approach where you can repeat this process time and time again without too much effort, and with that sit back and relax in the knowledge that you have given yourself the best chance of success.
If you would like more information about becoming an expert buy to let investor, or to discover the latest high-yielding developments available in the UK’s property hotspots, call us today and speak to one of our award-winning property specialists.
