Yes, generation rent is on the rise, and the housing shortage is pushing more people into the rental market. But that’s not to say that buy-to-let landlords should be resting on their laurels. If you want to get the most from your investment, you will want to maximise the rental yield on your buy-to-let property.
If you’re in the process of choosing a buy-to-let property investment, these are some of the things you should consider when making your decision:
Picking Your Area For Best Rental Yield
As Kirsty and Phil have been telling us for years, it’s all about location, location, location. Along with picking an up-and-coming area to invest in, where you will get a return and ongoing rental yield as popularity grows, there are some other aspects to consider.
Firstly, pick an area with good transport connections. The majority of people who rent have jobs in nearby towns and cities, and a good commuter route is therefore high on a prospective tenant’s list of priorities.
Areas in catchment for good schools are another winner; both at primary and secondary level. We would recommend checking out the primary schools, in particular, because it is more likely that parents of younger children will still be renting, before looking to buy as their child gets older. Some may even rent specifically to get a child into the local school before considering purchasing in their preferred location.
The Waitrose effect is something well-known in property investment circles. Basically, wherever a Waitrose supermarket is in development, prices are about to rise. This particular store is an indication of affluent nearby residents. Good bars and restaurants, coffee shops, and other higher end high street and designer stores springing up, are also indicators of an influx of affluence to an area. On the flipside, however, it may mean that prices have already risen… so it’s a question of getting in quickly.
Promising Locations for Property Investment
It’s important to note that a ‘promising’ area does not necessarily mean the cheapest, nor the most expensive. A promising location is one that people want to live in.
Rather than investing in a place that’s close to where you live, as many usual landlords might do, with property crowdfunding, you are free to invest wherever in the country offers the most promising rental yield opportunities. Investing in this way means that you don’t have to go out to check things in the property, chase rent, or fix things when they go wrong.
Never Neglect Numbers If You Want A Good Rental Yield
You must always, always do your research. Find out the cost of properties in the area, find out the average rental yield for different types of property in different areas.
You should also be sensible about where you’re putting your money: can you afford to live if the investment goes toes-up? Don’t ruin yourself, and be aware of risk.
Build a diverse portfolio, and don’t put all your eggs in one basket. If one investment goes wrong, when you have a diversified portfolio, you have other investments to fall back on.
Who’s Your Target Tenant?
Do you know what sort of tenant you’re looking for? If you haven’t thought about this, stop right now.
You need to do a little research and check that the property you’re considering investing in is the sort of property that tenants will want to live in. It’s no good, for example, going after the HMO market in an area where the leading demographic is in the 55+ age range. Matching prospective tenants to the area, and making sure that the home you’re offering meets their needs, is crucial.
Don’t just choose a property you’d like to live in yourself. Put yourself in the shoes of your target tenant. What are they looking for? Students aren’t after all the luxuries that young professionals are – they’re more focused on location, if anything. Likewise, families are likely to prefer properties with outdoor space.
Families are also less likely to be swayed by luxury, as much as the notion of having a blank canvas on which to create their dream home. With white walls and no furniture, it’s theirs to do as they wish, within reason. Giving your tenants this freedom ensures they’re more likely to stay for the long term, which is good news for landlords.
Remember, too, that lots of tenants have pets, particularly cats and dogs, and all too often, landlords limit their prospective tenants by not allowing pets in the property. Not that that’s a concern when you’re a crowdfunding investor, but still – something to bear in mind.
Well-Appointed Properties Go Faster
Making things easier for your tenants, with all the mod-cons they’ll need, will help your property get snapped up sooner.
Microwaves, ovens, washing machines, and dishwashers, all make a property more appealing to tenants. Knowing they don’t have to buy these items themselves, and that their maintenance is covered by their landlord, is always a plus when searching for a place to rent. If you can go even further, offering things like wifi and wine fridges, all the better, particularly when dealing with young professionals as tenants!
Hopefully, this will have given you some ideas to consider as you narrow down the properties you wish to add to your buy-to-let investment portfolio. Do you have any other ideas to help prospective investors choose wisely? Why not drop us a tweet with your idea!