What Makes a Good Investment Property?

28th April 2014 posted in Buyers Landlords

If you are looking to invest in a property for buy-to-let, then it is important that the property you end up buying is going to be suitable and deliver the best returns. Property is now one of the top four most common investments, alongside cash, bonds and shares.

Once you have made the decision to invest in property however, it can be difficult to work out where to begin, what you need to look for and how to make sure your new asset will be the investment you had hoped for.

There are different types of accommodation you can invest in, but before you make any big decisions have a think about the options below:

City or Rural?

It is important, when considering a property for buy-to-let, to remember that you are not the person who is going to be living there, you are buying a property based on levels of housing demands. You need to think about what the market wants when it comes to a home and the majority of the time that is not going to be a house out in the countryside.

You may find yourself taken in by a beautiful rural cottage, but it is important to ask yourself how many people would see that as their ideal rental property. The majority of jobs are located in cities, so by renting a rural home tenants will most likely have to endure a long commute to work.

When you look at the demographic of countryside dwellers, they tend to be 40 years old or more. This demographic have usually been on the property ladder for a while and already own their own house, so won’t be looking for somewhere to rent.

Flat or House?

Again, this is a case of doing your research thoroughly and finding out which type of property is most popular within the market. In regards to buying a flat, you may also need to consider any service management charges for the building it is in, whereas a house will not have any extra management charges.

Another think to look at is how the prices for flats and houses have gone up over the last few years. While the cost of flats has definitely risen, it is only around half of the cost increases of houses. These days there are tons of flats to choose from, with more new developments coming onto the market every day. They are definitely popular with renters, but there may be a very high level of competition to get your flat filled with so many available.

Flats also have a lot of different restrictions that can sometimes put potential tenants off. For example, they usually have no garden, they are awkward for those who own a pet and they are usually crammed in, meaning there is a lack of privacy. Flats appeal to single, young professionals, whereas houses appeal to families; so think about the area you are investing in and who lives there.

Large or Small?

Whether you decide to invest in a small property or a large one will depend on the type of rental you are looking at. Large properties are fantastic to rent out to families and bring in a bigger amount of rent, but if they are left empty at any point they can become expensive.

Smaller homes tend to be more in demand, as those looking to rent tend to be young professionals or students, so if you were thinking of buying a large property, you could always consider investing in two smaller ones instead.

If you decide to buy a smaller property, then think about investing in one with good transport routes, as if a young family does rent it, then they will be more likely to stay for a while. Flats and small houses tend to be in higher demand, therefore bringing in a stronger amount of rent.

Students or Not?

People can often feel wary when it comes to renting out properties to students, but they are always high in demand and generally create a great cash flow. Students can be messy and noisy, but they are usually only living in the property during term times.

The supply/demand ratio is one of the best things about investing in the student housing market, and throughout the years it has been the main part of the property market that has remained stable even during the economic downturn.

Even though the number of students dropped off a bit when the tuition fees were increased back in 2012, the number has now risen back to the same levels as 2010. There is always a shortage of student properties, so it is a good place to get started if you aren’t too worried about the potential downsides of renting to very young people.

Conclusion

Whatever you choose to do, the important focus needs to be on the potential yield and future growth the property can provide. Any property is rentable as long as it is finished to a high standard and priced appropriately.

It is important to do your research and understand the market in the area you are looking to invest in. By choosing a property with a high demand and offering a well-presented property, you are sure to end up with a great buy-to-let situation.

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