For the past 10 years, we’ve been helping our clients source the right investment properties to suit their goals, no matter whether it is their first or twentieth property.
Now with property investment being one of the most popular forms of investment in the UK, we have started seeing an increase in the number of property investors asking for our help.
This blog summarises the checklist that we use for our property investor clients, so that you too can start your property investment journey.
What You Need to Consider Before You Purchase Your Investment Property
Although buy-to-let properties can be a good investment there are risks to consider. That’s why we recommend that you take the following 10 steps:
1. Set Clear Goals
Be clear on what is your goal for your property investment. For example, is it to:
- Create ongoing cash flow from the profit you receive from the rent, or
- Make money from increasing the value of the property?
Of course, you can achieve both by holding a rental property for long-term. However, you need to decide what your goal is to ensure you purchase the right property.
The decision on where to buy and what type of property depends on your short, medium and long-term goals.
2. Determine Your Strategy
Investing in property provides several strategy options. Before you decide on what type of property you want to buy, you need to be clear on your strategy. This may include:
- Renovate and convert the property into an HMO to maximise your rental return
- Hold the property for the long-term increase in value
- Build property to sell
- Renovate older properties to increase their value for sale
This also includes being clear on what is your exit strategy. You want to think about this at the beginning so you can make the right decisions for the life of your investment.
3. Check Your Finances
You need to ensure that you’re financially ready to become an investor, or to include more properties into your property portfolio.
Now is the time to check your spending, debts and saving habits. You will need to get your finances sorted so that banks and lenders will consider lending money to you.
4. Get Your Team of Professionals
It is essential to have professionals on your side to assist you with keeping track of your financial, tax and legal obligations, as well as helping find the right property to meet your goals.
5. Consider the Types of Tenants You Want
Be clear on the type of tenant you want to rent your property to. For example, do you want to rent your property to:
- Working professionals
- Local housing allowance
Also consider if you want to offer a single let or multi-let.
6. Find the Right Location and Property
Now that you know your goals, your strategy and your finances, you will have an idea of what type of property you want (flat, townhouse, HMO, house) and which tenants may be interested in your property.
Once you narrow this down, you can then determine suitable location options.
When researching locations, it’s important to consider not only where the growth areas are, but also which locations are popular for young professionals, families, students or retirees.
When you are researching locations, consider things like:
- Is it in a safe neighbourhood?
- Is it walking distance to transport?
- Is it walking distance to London Central?
- Is it close to great restaurants, pubs, squares, parks?
- Is it close to schools, universities or leisure facilities?
7. Check the Potential for Capital Growth
Do your research of the area to check if there is the potential for capital growth. This means checking the supply of properties in the area versus the demand.
If the demand is predicted to rise faster than the supply, then a property in this area may provide greater potential for Capital Growth.
The key indicators are checking if the local Government or the Private Businesses are investing in the area to increase or sustain employment. This could then lead to a population demand.
8. Know What Property Structure You Want
Once you’ve settled on a location, the next step is to decide on what property structure you want: a freehold, leasehold or an HMO property.
- When you buy the property, you buy a lease from the freeholder
- You will pay an initial purchase price and an annual ground rent, annual service charges, maintenance fees and a share of insurance for the building
- You cannot undertake any significant works on the property without the permission of the freeholder
- You may be subject to other restrictions, such as subletting rooms or pet ownership
- You own the land, so there is no rent to pay
- You have sole responsibility for maintaining and managing the building and land
- Freehold is the common way of selling houses, although some new-build houses are recently being sold leasehold
An HMO is a ‘multi-let’ rental property that has three or more tenants, not from one household/family, that share amenities. This can include:
- A house which is split into bedsits or units
- A house, or flat share, where each of your tenants has their own tenancy agreement
- Students who live in shared accommodation
- Properties above commercial buildings (such as shops, offices or restaurants)
All HMO properties must comply with the HMO rules and have an HMO licence.
9. Know What Property Features are Most Valuable to Tenants
The next step in selecting a property is to find the one that provides the most valuable features that future tenants will pay more for.
This includes features such as:
- Lots of natural light
- Allowing pets
- Low maintenance garden
- Providing high-speed internet
- Close to transport links: for inner-city locations, this includes bus and tube stops or access to major roads and a local train station
- Communal shared spaces
- Modern, clean and practical designs using quality features
Ultimately, you’ll attract better tenants if your property has features which are in high demand.
10. Determine the Total Investment Cost
The final step is to determine the total investment costs for investing. This includes any costs to add value to the property (such as renovating a kitchen, bathroom or converting a single dwelling into an HMO).
You will also need to calculate the ongoing costs of maintenance, repairs and property management.
Investing in the Right Property
We recommend that if you are thinking about investing in a property that you start by getting professional advice, so you can make a considered decision.
At REKA Property Management, we give our clients the facts about the property industry and focus on getting the best return on your investment.
If you want to know how to achieve solid rental returns and have peace of mind with your property, then call us on +44 (0) 203 286 6468 or email us at Admin@RekaProperty.co.uk