How to Find Investment Properties
If you're thinking of purchasing an investment property you will have many things to consider, but finding the right property for your needs is first and foremost. In this guide, we'll talk about identifying the right area and property type for the different types of tenant you may potentially let your property to.
Identify an area
How do you choose where to invest? Which are the property hotspots and areas with high tenant demand? Is it better to have your tenants close by or retain some distance?
The answers to these questions will depend on your chosen location and your own circumstances, so the best people to help will be our buy-to-let experts at your local Hunters branch.
Whether you are looking to buy on your doorstep or further afield, our expert staff will be able to help, as they have access to properties and expertise across the country, via our network of more than 200 branches nationwide and have years of buy-to-let and property management experience.
It’s important to throw emotion out of the window when searching for a property to let. Choosing a property is not about your personal tastes but about what tenants are looking for and which property type, location and let gives you the return you are hoping for.
Once you have established your investment objectives: income, capital growth or a bit of both, it is essential to understand what type of tenant and let you want, then look for the property most likely to appeal.
This is where the local knowledge and expertise of our buy-to-let staff at Hunters can be invaluable, as we have direct access to tenants in your area and know exactly what types of property they are looking for.
Things to consider
- If the property is over 25 years old, maintenance costs may be higher, as electrics, the roof and heating systems are all likely to need attention.
- With a flat or leasehold property, your income could be reduced through above-average increases in service charges or large, one-off major works costs you hadn’t budgeted for.
- A new build may mean lower maintenance costs, but you may pay more for the initial purchase.
- Unattractive properties may rent well, but be difficult to sell in the future.
- It may prove difficult to rent a property which is noisy to live in, for example near a busy footpath, over a shop, by a railway line or near a school or factory. These properties can also prove difficult to finance and sell.
- Apart from in inner city areas, most tenants require parking.
There is no such thing as a ‘typical’ tenant – they come from all walks of life and represent a diverse group of people. Renting is no longer seen as a temporary stop-gap – due to cultural shifts and, in some areas, affordability issues, many people rent through choice on a long-term basis.
These are some of the tenant types:
Prime market tenants
People working temporarily in the UK, such as medical consultants or corporate high flyers, may want a premium property for just a few months or for a fixed amount of time that ties in with their employment contract. Most tenants of this type will rent through a qualified letting agent, such as Hunters.
Most tenants fall into this category and many of them rent for several years or more. These tenants look for good quality homes with an easy commute to their places of work. Some are willing to pay up to a 10% premium for a new build property which has never been occupied.
For the first time in the UK, there are now more tenants renting privately than there are in social housing. Rather than house people ‘for life’ in social housing, successive governments have looked to the private rental sector to provide temporary housing, funding the difference in costs through Housing Benefits, while cutting funding for building new social homes.
This has created a specialist rental market for those on benefits, which requires an understanding of housing benefit levels and upcoming changes.
Currently, housing benefit is paid to tenants and is capped according to government guidelines and local authority research on rent levels. It can change annually so it is important to check the current rates. Many tenants receive the housing benefit payment themselves but, in some cases, it is paid directly to the landlord.
The government is currently in the process of replacing housing benefit with a new system called Universal Credit, paying all benefits to a person in a lump sum. This means social housing tenants will face the challenge of budgeting to pay their rent on time.
If you are interested in renting to this sector, it is important to research how your local authority deals with social tenants in arrears or talk to our experts at Hunters and we will explain how it works.
This has been a real growth area in the past 10 years, particularly in expensive areas. It is also a popular choice for young adults who have become used to sharing a home while taking further education.
Such properties are usually considered to be Houses in Multiple Occupation (HMOs). A property is an HMO if at least three people live there and form more than one household (ie are not related), and they share toilet, kitchen or bathroom facilities.
HMOs which are three storeys or more and have five or more unrelated sharers require a licence across England, however this national criteria varies in different local authority areas, so do talk to us for advice if you are considering an HMO. It is also vital to you check if planning permission is required to run an HMO before you proceed with a purchase, in case permission is declined.
If you plan to let to students, talk to the university’s accommodation officers as well as our experts as you may need to be an accredited landlord to let to students and the area students tend to live can be very limited and specific.