6 Aug

How do you know when a Buy to Let property is a really good deal?

Posted 6/08/2015 by: Reeds Rains

In property investment, a ‘good deal’ is one that not only provides better or more suitable returns than you could get by investing your money elsewhere, but also achieves better returns than the average property investment in your area. It isn’t that difficult to find a property that will deliver average returns; unfortunately, that’s not a ‘good’ deal, it’s an average one. The ideal is to find an investment that will grow in capital value more quickly than others in the area and/or that will give a better yield and leave you with higher rental profit than the average investor receives.

Finding this kind of property and being able to project returns over the short, medium and long term, in order to assess whether it is indeed a ‘good deal’ takes time and effort. It also depends on sourcing and taking the right expert advice.  So where do you start?

First, you need to be clear on your investment objectives – are you primarily concerned with capital growth or rental income? It is highly unlikely you will be able to find a property that delivers both at a fantastic level, so you need to decide which is more important, as that will determine the area, type of property and type of rental.

Next, look at your finances and make sure you are aware of all the costs involved in purchasing and getting your property ready to let - the deposit, mortgage and survey fees, renovation and refurbishment fees, certification and licensing costs (as applicable), etc. – and make sure you have sufficient capital available. This is something that our local experts can help you with, if you are not sure what all the costs will be. 

Local area research is where investors can fall down, especially if buying a property without seeing it first and having an expert take a look. Successful Buy to Let is not just about finding the cheapest property that you can charge the most rent for; you need to look at whether the area is one which will attract the right tenant and if, over the next 15-20 years the property and area will do well economically. Carrying out solid research – or getting this help and advice from your local Reeds Rains office – helps ensure you know from the start if you are getting a genuinely good deal, not just something that looks good. 

To really know whether you are buying in the right area, you should know:

  • Which areas have the best capital growth and which have the best income potential
  • The local economy of different areas: employment, average wages, age trends and current & future inward investment in amenities and infrastructure
  • New housing plans which will determine whether any type is likely to reach saturation
  • Checking tenant demand is increasing in the area

You have a choice, you can either carry out this research yourself, or from our perspective, there is no substitute for the local knowledge and expertise that you can tap into by speaking to our letting experts who don’t just understand the lettings market but also know that to you, Buy to Let is an investment you need to make money from. 

Our local agents know all about prospective tenants every day needs and can therefore advise you about demand and how much rent you can expect to charge different types of tenants. We can also tell you which types of properties always let quickly and where there are shortages so a property you purchase has the best chance of renting at the maximum rental price. 

Once you have decided on a property, whether it’s one you buy through us or another agent, we can help you with the purchase process and make sure the property is legally let to a good tenant as soon as possible. 

Finally, having secured a really good deal, make sure you hold on to as much of your profit and wealth as possible. This requires having a good bookkeeper, accountant and property tax advisor, all of whom should work together to ensure you invest in the most tax-efficient way possible. 

At Reeds Rains we are here to help with every stage of the Buy to Let process, so please contact us if you would like to discuss your Buy to Let plans with one or more of our experts. Call 0845 450 0865** (calls cost 2p per minute plus your phone company's access charge), email or pop into your local branch.

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Our initial mortgage consultation is free. We will charge a fee between £349 and £699 on application. The amount we will charge is dependent on the amount of research and administration required.