With markets on tenterhooks waiting for a Europe sized hole to soon be making a dent in the collective bank balance, now, more than ever, is the time to be thinking about our finances. It seems that we keep hearing that millenials are worse off than departing generations before them. As such, prudent investment is essential if it’s not be an era of 40 year olds sleeping on their parent’s sofas, raiding the fridge for cheese and drinking dad’s old homebrew. With that in mind, here are 4 IDEAL tips for first time buy-to let property investors.
LOCATION, LOCATION, LOCATION
Buy-to-let, in short, is the buying of a property with a view to renting it out again. All in the name of the dollar. Such a move has numerous benefits; it’s more tangible than stocks and shares and can generate a steady income for the new landlord. But in order for the investment to be a success, serious research needs to occur before any money changes hands.
This all starts with location, and looking into the best locations for your buy to let property to be based in. Northern cities like Liverpool, Manchester and Leeds have been rising up the ranks as property investment hotspots as of late, offering the best rental yields, most affordable prices, and promising levels of demand. Not only this, but new regeneration projects and developments underway with the Northern Powerhouse initiative mean that capital appreciation throughout the north is expected to soar. Although, seeing as this is a drive dreamt up by the enduringly inept George Osborne, we wouldn’t hold our breath for it to bear much financial fruit. With messages constantly conflicting, thorough research is imperative.
CONSIDER HELP WITH FINANCE
Going it alone when the stakes are so high isn’t feasible – or advisable – for most young investors. From mortgages to tax, and all the bureaucracy that entails, there’s a lot to think about financially before making your first property investment. If you need some help funding your investment, a buy to let mortgage is the most popular option. This is similar to a regular mortgage in that you take out a loan that’s calculated on the rental income of the property, and pay it back over time.
There are a number of types of tax that investors in the UK are liable to pay, such as stamp duty tax, capital gains tax, and tax on rental income. To get a better idea of the finances involved, it’s worth taking some time to do some in-depth research or speak to a financial adviser to ensure you’re properly prepared. On the flip side, tax relief could be available to ease the financial burden.
TARGET MARKET TENANTS
The type of tenant you want your property to attract should dictate a fair few elements of the investment. If you want to rent to a younger market, such as young professionals or students, it’s a good idea to look for a property in a prime city centre location, in a city with a thrusting, upwardly mobile population. If you have a different type of tenant in mind such as a family, then looking for a property in a more suburban area is best, especially one with a lot of space and a garden. And if you’re a respectable, respectful, responsible landlord, then you’ll know that picking and choosing your tenants based on demographic is a risky, unethical business.
CHOOSE YOUR PROPERTY TYPE CAREFULLY
Types of property available in the UK are hugely varied, from flats, terraced houses, detached houses, bungalows and more. One key consideration is whether you’re going to invest in a new build or older property. There are, of course, benefits to each, such as new builds being more eco-friendly and generally cheaper to run than older builds, whereas period properties can be appealing to tenants that like their home to have some history behind it.
Off-plan property is another option to consider, which is property which hasn’t yet been completed and is still in the development stage. Investors can sometimes be put off by off-plan properties as they can’t view the property in person before making the investment. Companies like RW Invest, however, take steps to help people get a better feel of how an off-plan property will look with showrooms and computer-generated imagery. Such an investment can often be more profitable in the long run, with properties in certain up and coming areas having grown in capital appreciation before the property is even ready to let.