Are You a Budding Property Investor? Here’s Where to Start
With Brexit uncertainty, changes in tax rules and a surcharge for second properties, letting profitability is a hot topic. While the landscape has become perhaps more complex to navigate, we believe there is a lot of opportunity for growth in this market, with the right guidance and information.
There are still great opportunities going in current property hot spots such as Glasgow’s West End and Edinburgh, in fact in any area that has an obvious appeal – such as student cities or commuter towns. Though it’s slightly tougher for potential landlords than it was several years ago, there is still good potential to invest well and supplement your income, pay into a rental property for a future pension fund, or even get into the property investment business full-time.
Like most investment opportunities, the more informed your decision, the better chance of your investment paying off. Consider the following points, and go in with your eyes wide open to any hidden costs and potential pitfalls as well as opportunities for success.
Find a promising area
Before starting your property search, take a more general look to get a feel for a variety of areas first. Ideally, you’re looking for a well-priced property somewhere well-established or seeking out up-and-coming areas where you might seize the chance to catch a bargain whilst in the knowledge that there is increasing interest and lots of people moving to that area. Get a feel for any interesting areas by paying a visit, taking note of the pros and cons of the location. Questions to ask include whether the area has good transport links, top local amenities, a vibrant nightlife, and good schools or is it popular with students, families or young professionals? Our local branches can always help with information about local markets on both letting and sales.
Consider your target market
Understanding why an area has an appeal will help you narrow down who your ideal tenants will be. When you get to the stage of viewing property, keep your target audience firmly in mind – remind yourself you aren’t house-hunting for you! Young professionals might look for a property with more modern, top spec finishing touches, in accessible commuter areas with proximity to transport links and plenty of good nightlife spots and access to gyms, shopping etc. Family-sized properties will be more popular if near to good schools and local amenities. Deciding on the area and target market are important decisions that will influence the rest of the buying process, helping you get the right tenant in and achieve the best rental returns for your specific property.
Renovation project or walk-in condition property?
The question whether to buy a property that’s in move-in condition or one that requires renovation is largely answered by how much time, money and DIY experience you have. In a newer property, there will be less work to do, you will have paying tenants in more quickly and there is less chance of having to invest in maintenance work in the future. However, fixer-upper properties can provide good returns, as long as work carried out can be done within budget and not become a DIY nightmare – if you have confidence and experience of carrying out work yourself, this could be a good option, especially if property investment is to become your main job. Follow the property developers’ rough calculation, where you want the final value of a refurbished property to be at least the purchase price, plus the cost of work, plus 20 percent.
Do your sums and forward planning!
Have you got a good grip on your finances? You’ll be looking to make a profit on top of any mortgage repayments for your buy-to-let investments, also considering unexpected maintenance costs and covering the mortgage payments between tenants when your property might sit empty. Shop around for the best mortgage deals and be aware that lenders typically ask for a deposit of at least 25% and insist that the rental income is 125% of the monthly mortgage payment.
Consider how hands on you want to be in managing your property/properties and whether you would rather pay an agency to manage and rent out for you. Again this is a careful consideration, taking into account how much time and money you have to spend.
Need advice on getting into the property investment game? Our team at Clyde Property can be a one stop shop to help advise you on up-and-coming areas and the best current investment opportunities as well as further manage your letting portfolio on your behalf. Give us a call today.