Property investment is always exciting but although it is usually considered one of the most secure in terms of returns, how can you be sure that buying property to let will not become more trouble than it’s worth?
Choose carefully and a residential rental property is certainly likely to hold its value, but expert advice and guidance right from the start on what and where to buy will make all the difference. LevelUp Property Management has a guide for those still toying with the idea of buying a property to rent out to tenants – how to choose wisely and what signs, positive and negative, to look out for.
And, of course, once you’re ready to go, the Milton Keynes company will handle the drawn-out processes that follow the purchase, from finding the right tenant to carrying out regular inspections, maintenance, rent collection and ensuring the property is legally compliant.
But first, if you’ve found a property you’re interested in and have assessed your ability to fund any work it needs to get it to rental standards, what else should you be considering in terms of a profitable rental property?
Unlike a property you and your family want to live in, it’s important to be patient and dispassionate about a rental investment. Factors that appeal to tenants may not be the same as those that are important to you, so try to see it from the point of view of the tenant.
Look for properties with good local schools. These will attract more families as potential tenants. Families tend to be reliable for year- round rental payments as their children become settled at their new school. Longer tenancies with families are more likely with good primary and secondary schools in the area.
Low crime rate
The crime rate of an area will be a factor in a tenant’s decision, so try to find a property that is in a low crime rate area. A scenario that often occurs is that a potential tenant will be enticed by an advert. They will then make an inquiry, but then, after further research into the area they will find out there’s a high crime rate and be put off. Petty theft and car crimes are big detractors to property values and the prices that landlords can charge for rent. It is important to consider this when looking for a profitable rental property.
If a prospective tenant is looking for a small family home to rent, having a garden will make your property much more desirable. Every family wants their own safe space for children play, to have barbecues in the summer and allow family pets to spend time outside.
The average rent in the area
This comes with assessing the local area. When completing a search, it’s important to look at the average rent for similar properties in the area.
If the average rent of the property will be too low to cover all of the costs associated with being a landlord, then it’s a non-starter.
The type of area
Is the property in a modern city with vibrant nightlife and plenty of amenities? Or is it in a village with some key local amenities more suited to a quiet life? Keep your ideal tenant in mind when looking at areas in which to buy. A young professional will want to be as close where they work, whereas some people prefer to live in a quieter location and have more space.
Age of the property
Although they do have charm, properties that have aged tend to bring several issues that are difficult and expensive to fix, including asbestos, window replacements or a new heating system. There can also be issues with some new builds, particularly ones that are rushed to be built to a deadline. Look at the age of a property when considering whether it will be a profitable rental property and have all relevant safety checks completed by a quality surveyor. Having to fix a number of issues with your property before it can be put on the rental market eats away at profits in terms of time and cost.
What are the transport links like in the area? The key to a profitable rental property is to have solid transport links such as a good train or bus service and main roads that don’t snarl up every rush hour.
An area with high vacancy rates will mean that other landlords are having to reduce the rates of rent that they charge to keep up. Looking at the trends of vacancy rates over time is useful as well. These can be particularly relevant in university towns or cities where students rent for the term time and tend to vacate in the summer periods.
Can you afford the property?
The last (and most obvious) thing to think about when purchasing a profitable rental property is whether you can afford all of the payments involved. Paying the mortgage, solicitor fees, and other expenses can really add up. Mortgage lenders also tend to require a higher deposit when you are buying to rent. Look at what rent you will likely be charging, what your expenses will be, and find the difference. You must then take into account how likely you are to have this income coming in securely every month wherever possible. Don’t take these decisions lightly as it can be difficult and take months to sell your property once it has been purchased.
If you do decide to dip into the buy to rent market, factor in a property management company like LevelUp Property Management to take all the time, effort and stress out of making it work.