Our guide to buy to let properties

People get into buy to let properties for a variety of reasons. Sometimes it’s purely as an investment, or sometimes it’s to enjoy a second home that can also make them some money. One of the most important things to consider before investing is exactly where the best place to buy is.

Where to buy in the UK?

Top buy to let locations have a number of things in common and you can figure out which is the best area for you by deciding on the type of tenant you want as well as how much you have to spend.

A budget that would buy you a sizeable house with a garden in a northern satellite town or semi-rural location would only buy you a small to medium flat in the centre of a northern city such as Manchester. In London it might only get you a studio flat.

If you’re looking for a long term let which will give you guaranteed income over a few years, a family house in the north might be the best option.

The monthly income might be lower than in Central London – even comparing the fact that one is a house and the other just a couple of rooms – but over time the income might be more reliable.

Alternatively, if you’re comfortable with putting in more time and effort into managing your buy to let, a higher income flat aimed at young professional singles or couples, where tenant turnover is greater, might be more lucrative.

Either you or your letting agent will need to be more proactive at making sure it stays let (professional city dwellers tend to have shorter stays in their rentals than suburban families), to avoid potentially missing months of income.

Young professionals in cities can also be more demanding when it comes to broken appliances and repairs, as the might lack the time or skills for basic maintenance tasks.

Where you currently live is also a factor. Most investors won’t be able to invest as much in a second property as they have in the house they live in, meaning one of two things – either the investment property is in the same area but much smaller, or it is in a different, cheaper location.

Even if you employ the services of a letting agent, being far away from your tenants can cause problems.

If you are confident your property is in the hands of long-term, trustworthy and capable tenants who will keep their accommodation up to scratch then you could consider being in a different part of the country.

With more high-maintenance tenants like city dwellers, landlords might prefer to be more readily on hand.

Holiday buy to let

Some might consider this the ‘have your cake and eat it’ option. A number of investors get their buy to let property to do double duty by providing themselves with a great holiday getaway, while also bringing in some money.

If you're investing in a holiday buy to let make sure that your idea of a great holiday is also someone else’s and do your sums.

Unless you buy abroad in an area with year-round sun, will your holiday home be occupied only part of the year? And do you want to occupy it when you could be enjoying income from peak season rates?

Empty properties have their own challenges and may be difficult to insure and maintain, particularly if they’re a long way from your own home.

What about renting to students?

Many buy to let landlords start out owning properties for students. A property in a university or college town has a ready supply of tenants, and the college will often help match landlords with students and provide specific buy to let advice.

Furnishings can be cheap and cheerful and the lettings periods are almost always clearly defined.

Do bear in mind however, student regions vary widely across the UK. Central London and areas with larger proportions of high-spending foreign students mean higher quality furnishings are required.

Generally though, student spending power is limited. This means investing in a property where even the reception rooms can be converted into self-contained study bedrooms (sitting rooms are very much a premium product in the student market) with enough bathrooms to serve multiple occupants.

Finding this sort of property in the South East of the UK can be an expensive exercise. And again, unless you also live in the student town, you can find yourself a long way from your investment.

Be sure to do your sums properly

Most buy to let investors talk in terms of yields or return on investment – they’re not the same thing. The monthly or annual yield is how much rent you can expect to get from the property.

The return on investment includes this, plus how much you might expect to get when you sell the property on again.

This should influence your decision about where to buy your property. Experts suggest that the most successful buy to lets are done on the basis of how much income they provide over a long period of time.

Seeing property prices increase rapidly over a short period of time in some areas makes it tempting to invest in buy to let just for the price increase. But these price increases aren’t guaranteed.

In many regions of the UK property prices increase much slower and not by a large margin – not one that will deliver a big enough difference once you take into account the costs of buying, renovating, letting and then selling on again.

This doesn’t make for an unreliable buy to let bet though. While the price of the property may remain relatively stable, the house can bring in a steady monthly income, or yield, that satisfies the financial needs of the investment.

                                              

BUILD: MASTER