Buy-To-Let Tips

Practical Advice To Help You Profit From Rental Property

Property Hotspots
Tips On Purchasing Your Buy-To-Let Property

Nowadays, investors are buying investment properties all over the world from villas in Florida to apartments in Spain plus even more exotic locations such as Montenegro and the Cape Verde islands. Everyone is looking for the next hotspot (an area with prices rising more rapidly than the avarage) and hoping to get in early and reap the benefit of a large capital gain.

Hotspots can occur internationally and locally in any location where there is a rise in demand from buyers due to various factors. But while a capital gain is icing on the cake a buy to let investor is looking for a good yield over the long term so it is important to buy your investment property in an area with a good long term tenant demand.

1. Look for an up and coming 'hotspot'. The problem with hotspots is that once an area has become widely known as a hotspot e.g.through newspaper articles, big price rises have already occurred. Try to look ahead of the crowd and look at areas next to the hotspot which are likely to be the next in line for big price increases. Here are some factors which are linked to an area becoming a hotspot:
   
   Proposed improvements in transport such as improved road and rail links, expansion of local airports and improved public transport.
   
   Proposed new investment from private companies and government agencies.
   
   Proposed improvements to facilities such as sport centres, parks and shopping centres.
   
   Schools with an improving standards and reputation.
   
   Positive comments about a location from letting and estate agents and other investors and property professionals.
   
   On a larger scale, look for increasing demand due to immigration to certain parts of the country. Also internal migration e.g. in the US there is a big demand for family homes as people migrate to the Sunshine State.
   
   
2. You need to buy an investment property that gives you a positive yield. This means the investment puts money in your pocket after all expenses are taken into account. This includes interest payments, repairs management fees etc. and an allowance for when the property has no tenants. With  a weak housing market presently it makes no sense buying just for capital appreciation.
   
   
3. Target the sort of tenant you want and buy your property accordingly. Are you aiming at families, professional couples, professionals who want to share, university students? Do you plan to provide accommodation for employees of a particular organisation? This indicates the sort of house you need to buy.
   
   
4. Buy where there is an obvious rental market e.g. near a large employer. This could be government offices, private businesses, hospitals or universities. Or perhaps in the city centre where there are excellent recreational facilities. Consider why a tenant would want to live there. Try to avoid buying a house in a non-descript suburb miles from major employment opportunites or facilities.
   
   
5. Buying the worst house on a good street makes more sense than buying the best house on a poor street. You can always improve your house and add value to it... but you cannot improve the street.
   
   
6. Talk to several letting agents about your plans to purchase a buy to let property. Find out about the sort of properties that are in demand from tenants and which will let easily. Find out if they have a surplus of a certain kind of property e.g. new-build two bedroom apartments, or if there are areas of the city they do not deal with because of the difficulty of finding tenants for properties in those locations.
   
   
7. Do your research and do your sums. Find out about house prices and rental levels for those houses. Do you get a surplus after the deduction of all costs? Find out about tenant demand... will you be able to keep your property be kept fully let most of the time?
   
   
8. Beware of saturated rental markets. In some places there are just too few tenants for all the accommodation available. This problem can occur with holiday lets: Florida villas and Spanish apartments, expensive city centre apartments or student shared houses suffering competition from purpose-build student apartment blocks.
   
   
9. Avoid areas no-one wants to live in if they have a choice. Buy to let properties that have an apparently high yield because the properties are cheap due to being in 'bad' areas may well be harder to let and have higher maintenance and management demands. If a letting agent does not take on properties in certain areas ask why. 
   
   
10. Plan how you will manage your buy to let investment. If you buy locally it is easy to manage it yourself, but if you buy hundreds of miles away or in another country you will need to have carefully thought through how you will deal with tenants and property maintenance from a distance.
    
    
11. Consider when to buy. In the UK we have seen a massive house price boom in recent years so houses in some areas are now offering property investors yields below the actual borrowing rate. And with house prices static or even falling there is no short term capital gain to look forward to. So to make the figures for buy-to-let stack up be careful to select an area and a tenant group that pays enough to produce a positive yield now and capital growth in the long term.
    
    
12. Get your buy-to-let property at a bargain price. Experienced investors know that a slow market is a good time to buy because it is easier to find real bargain-priced property. Some property owners just have to sell and if they are really desperate they will accept a big reduction in the asking price. Knowing how to hunt down these bargain properties is one of the big secrets of really successful property investor