What makes a property a good investment property?

Find a profitable buy-to-let opportunity with this expert advice from Belvoir


At a time when property prices are falling and there are more tenants looking to rent properties than ever before, it would seem that there’s never been a better time to become an investment landlord. But, choosing the right investment property can have a substantial impact on potential profit - both in terms of capital growth and rental return – so think carefully before sealing the deal.


Investment investigation…

It goes without saying that any savvy investment landlord should always do their research thoroughly before investing in a buy-to-let property.

It’s important to check out the competition, make sure there’s a buoyant rental market present and investigate if the area is already saturated with empty rental properties that haven’t let.

“Often investors don’t have any preconceived ideas of what they want or where, so it’s vital that they do their research or get advice from a property management agent,” says June Rakeshaw, Proprietor of Belvoir Cheadle.

A good property management agent should be able to accompany landlords on viewings and advise whether they think a property will make a good investment. “At Belvoir we know what will let quickly and where,” says June. “So we can steer investment landlords towards areas that are popular for rentals but are not already saturated.”


The ‘perfect’ property…

After doing your research and identifying a ‘need’ for more properties to let in that area you then need to find ‘the right’ property.

A good investment property is one that is going to attract a wide cross-section of tenants, and is therefore likely to avoid any long void periods.

“It essential to find a property that will let well,” says June. “We find that three-bed semis are good options as they open themselves up to two key markets – professional couples and families. This flexible living allows families to use the three bedrooms for themselves and their children while professional couples often use the space as a master bedroom, spare bedroom and study. If you can appeal to two good markets the property is more likely to let quickly and there is less chance of void periods.”

And remember, you’re not just ‘selling’ the property you’re ‘selling’ the location too. So, investing in an area which will be attractive to tenants is vital. “It’s essential to identify the needs of each market and link that with the area you’re hoping to invest in,” says June. “You need to paint a lifestyle so it’s not a massive leap for tenants to imagine themselves living there.

“Professional couples will often want a train station nearby, plus a major road network. Families will want to know there are excellent local schools. Good local amenities, such as supermarkets and restaurants, are also vital. Landlords will need to ‘sell’ the area to tenants as well as the property.”


Capital growth versus rental return…

If you’ve done your research carefully and chosen what seems like the ‘perfect’ property then the final thing you need to get right to ensure your investment is a profitable one is the price and potential costs.

Will the vendor negotiate a better deal for you? What will the property cost you in the short-term and long-term? Will it need refurbishing and on-going maintenance? And, will the property appeal to buyers as well as tenants so you can benefit from capital growth when you decide to sell?

“There are certainly bargains to be had at the moment,” says June. “Properties are currently going at quite a good price. However, the cheapest property may not be the most cost-effective in terms of getting a good rental return or avoiding void periods, so make sure you do your research.” How ever low the price tag, poor quality properties which require major refurbishment, plus sustained levels of high maintenance may prove a false economy.

“Also, look at all the options and think outside the box,” continues June. “Could you buy a larger property and convert it into flats? Several 1-2 bed flats in a block could potentially give you a higher rental return, plus you’re also likely to benefit from increased capital growth. If you’re going to be re-furbishing anyway it’s not necessarily going to mean a huge additional cost to convert instead and, if there are similar properties around it, it will fit in well.”

Look carefully at your budget and make sure you do your maths. “Before investing one of the the most important things for any landlord to look at is the expected rental return plus the potential for capital growth,” concludes June.

To ensure the best rental return for your property and to minimize the potential of void periods, place your property with a professional property management agency, such as Belvoir. They will be able to market your property and negotiate a realistic rental return on your behalf. To find your nearest Belvoir office, visit their website at http://www.belvoirlettings.com/


CASE STUDY

“It’s certainly a great time for landlords to invest”

Investment landlord Grahame Lawrence, from Brighton, says now’s a good time to invest if you have the capital available…

“I became an investment landlord about 10 years ago and now have four properties throughout the UK,” says Grahame.

“I decided to become an investment landlord at the time because property was rising in value and I thought it would be a good investment as I would be able to benefit from capital growth and provide a pension.

“Before investing a landlord has to decide what market he or she is trying to appeal to,” continues Grahame. “For example, if I was going to buy a holiday let I’d look for a property by the sea or in the country. If I was looking for a short-term let I’d probably look at the student market and make my investment in a major city with a university. A three-bed terrace or semi would be ideal. For longer-term lets I tend to go for smaller properties, perhaps a two-bed. Towns and their suburbs are particularly popular with tenants.

“All investment properties should be easy maintenance and in a good location with adequate local amenities.

“As most properties are currently selling at good prices, it’s certainly a great time for landlords to invest if they have the capital available.”


INVESTMENT TICKLIST

If you can you answer yes to the following ten questions you’re likely to have found a good investment property…

1. Is there a high demand for rental properties in your chosen area?
2. Have you made sure the local rental market is not already saturated?
3. Does the locality have good amenities and schools?
4. Is there good transport links or a major road network nearby?
5. Will the potential profit outweigh the costs?
6. Is the property bright, modern and attractive?
7. Does the property have adequate parking and outside space?
8. Is the property in good condition?
9. Will the property require little on-going maintenance?
10. Will the property appeal to both renters and buyers so you can also benefit from capital growth when you decide to sell?

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