Your ultimate guide to purchasing an investment property

Your ultimate guide to purchasing an investment property

Whether you’re looking to gain monthly profit from a tenant or grow your money in a capital investment, property is still proving to be a fantastic way to make passive income. There are things to consider before buying though, see our top tips before you make the jump…

As with any property advice, each property and buy-to-let situation is different, so be sure to ask for specific advice before you get started. Agents can often spot an incredible opportunity from a mile off and guide you in the right direction.

 

1.     Calculate your yield               

A rental yield tells you how much of an annual return you are likely to get on your investment.

 

Gross rental yield calculation:

(Annual rent ÷ property purchase price) x 100 = gross rental yield

For example… (£6,000 ÷ £150,000) x 100 = 4.4%

 

Calculate the potential return on any rental property you are considering buying to help evaluate if it has investment potential. Speak to a local letting agent to get an idea of the projected rent for the property.

 

2.     Consider capital growth

It is also worthwhile considering how long you plan to own the property, and how much it may increase in value during that time. Ultimately, capital growth also contributes to your overall return on investment.

 

3.     Check for demand           

Certain areas and type of property attract a higher demand from tenants than others. When you’re searching for an investment property, make sure you speak to a local letting agent who will be able to advise you about demand in each area.

 

4.     Look for convenience

Parking, access to transport links, local amenities - all these things will increase the property’s appeal to tenants.

 

5.     Widen your target market

Think about buying a property which will appeal to a wide section of renters rather than what would be your personal preference. This will increase the demand, helping to maintain a good rental value and minimise void periods.

 

6.     Avoid major downsides

Such as difficult access, strange layouts, high levels of noise pollution, dangerously steep gardens - anything that is likely to put potential tenants off.

 

7.     Estimate your cost of maintenance and repair

All outgoings - including any routine maintenance and repair - will impact on your net rental yield; so factor this in when deciding on what type of property to invest in.

 

8.     Factor in fees

Count in your mortgage re-payments, agency fees and the expected cost of landlord insurance, building insurance and rent protection insurance if you intend to use it. You will typically find that leasehold properties might be cheaper to buy but will have annual management fees and/or ground rents which you need to calculate into your yield.

 

9.     Minimise voids

A void period is the name given when a property is vacant and results in a loss of income. Choosing the right tenants right from the start and building a good relationship with your tenants can help keep void periods to a minimum.

 

10.  Check the Energy Performance Certificate

Since October 2008, rental properties in England and Wales have required an Energy Performance Certificate (EPC).

 

On April 1st 2018, the Minimum Energy Efficiency Standards (MEES) came into force. This required all properties being let or sold in England and Wales to have a minimum EPC rating of ‘E’ or above. From 1st April 2020, the Minimum Energy Efficiency Standards apply to all existing tenancies – not just new ones or renewals.

 

The government have proposed that all rental properties will need an EPC rating of ‘C’ or above by 2025. Like the previous changes, the new regulations will be introduced for new tenancies first, followed by all tenancies from 2028. Check the Energy Performance Certificate (EPC) of the property before making an offer.

 

Ready to get started? Get in touch to see what potential buy-to-let properties we have available in your local area or for any follow up questions about becoming a landlord.


Get in touch with us

Please make sure to fill in all the fields
Please make sure to fill in all the fields

Buyers remorse. A feeling of regret or anxiety after making a purchase. Often felt after spending money on something that you later feel wasn't worth it. Clothing bought in a sale because it was perceived to be a bargain when, in reality, you probably didn't really need or indeed want to buy it. You might not have even given it a second thought if it had not been discounted.

Are you considering selling your home but wondering how best to showcase the best features? Is there any way to encourage viewings? Creating a property listing that sells is far more involved than simply listing the rooms. Read this article to ensure that your property marketing leads to fantastic results.

Are you having to relocate for work? Often, relocation plans come somewhat out of the blue and can put you into an absolute tailspin as you try to figure out where you will live and what you will do with your old house, not to mention getting places in the schools for the kids. This article takes a quick look at what you can do to make this process smoother.

Do you have an empty property this winter? Perhaps you are trying to sell or rent it, and things are going slowly due to the cold, unwelcoming feeling that is creeping in as the winter progresses. This article shares the top tips for looking after an empty property through winter and what to do if you are trying to sell.