How to Choose the Right Buy-to-Let Property

Nikka Sulton

How to Choose the Right Buy-to-Let Property

Choosing a Buy-To-Let property differs significantly from selecting a home for personal residence. While personal preferences reign supreme in the latter, rental investments require a broader perspective. Attracting reliable tenants hinges on factors that may not align with your preferences but resonate with a larger audience.

Why is buying-to-let different to buying your own home?

When purchasing a property for personal residence, your preferences take precedence. However, for an investment property intended for renting, attracting reliable tenants is key. This means prioritizing factors that might not align with your personal preferences but have broader appeal.

For instance, public transport accessibility might not matter to you but could be crucial for future tenants. Similarly, while you might favor an open-plan layout, it may not suit the tenants you wish to attract.

Balancing broad appeal is essential, although catering to every individual need is impractical. Hence, it’s wise to consider the type of tenants you aim to attract. This enables you to seek a property that offers the amenities prospective tenants require, increasing your chances of a profitable investment.

How to choose a Buy-To-Let property

When assessing potential properties for purchase and rental, the following factors should be taken into account:

1. Location

The property’s location plays a pivotal role in attracting suitable tenants. Consider proximity to schools, supermarkets, shopping centres, public transport options, and even healthcare facilities like GP surgeries. Being situated near these amenities can significantly boost your property’s appeal. If your target tenants are students, closeness to their university is a crucial factor to bear in mind.

2. Property Type

The choice between a flat and a house can also influence the type of tenant you’ll attract. Evaluate the advantages of each option before making a decision.

3. Interior Layout

Different interior layouts cater to various tenant preferences. House shares typically benefit from spacious communal areas and private spaces for each tenant. In contrast, families may seek homes with ample storage and open spaces suitable for young children.

4. Outdoor Area

The presence of outdoor space, whether a terrace or garden, can be a significant selling point for specific tenants. However, if your target audience consists of students or young professionals with limited time for maintenance, outdoor space may be an unnecessary luxury.

5. Fixtures and Fittings

To minimize unnecessary expenses, prioritize properties with essential fixtures and fittings compliant with regulations. Ensure that the kitchen, bathroom, gas, electricity, and water fittings meet the required standards. Neglecting this aspect could lead to significant spending before securing tenants.

6. Maintenance

When viewing properties, be vigilant for existing damage, such as moisture, mould, leaks, or structural issues. Addressing these issues promptly is crucial to avoid future expenses. Neglecting maintenance can also open the door to potential legal consequences.

7. Resale Value

Looking ahead, you might consider the possibility of selling your property for a profit. While no one can accurately predict the housing market, it’s worth keeping in mind, especially if you’re interested in a property that needs some renovation work.

8. Eco-Friendly Features

An increasing number of individuals prioritize eco-friendly homes. Taking steps to ensure that the property you purchase is environmentally conscious or has the potential to be made more eco-friendly can attract tenants with environmental concerns.

9. Parking Facilities

Parking may not always be a top priority, but a property with convenient parking options is more likely to pique the interest of potential tenants.

10. Natural Light

When viewing properties, it’s beneficial to visit at different times of the day to assess how they are illuminated. A property might appear bright and sunny in the morning or early afternoon, but if it becomes gloomy in the evening, it could deter future tenants.

What to consider when choosing a buy-to-let property?

Before finalizing your property choice and commencing the purchasing process, keep these points in mind:

1. Avoid personal biases

While you might desire a house with an in-built Jacuzzi or an extensive garden, such properties might not be the most suitable for potential renters. Reserve your dream home aspirations for yourself and seek a property with broader appeal to maximize your chances of finding tenants.

2. Consider Your Potential Tenants

Instead, contemplate the kind of tenants you intend to lease your property to. For instance, your choices might include:

Professionals

Family members or relatives

Families in general

Shared occupancy

Students

Tenants eligible for housing benefits

3. Establish a Financial Plan

Investing in property can yield substantial returns, but it’s not without its risks. It’s prudent to establish a clear budget that considers:

Maintenance expenses

Renovation costs

Potential periods without tenants

Agency charges

Mortgage fees

Legal expenditures

Landlord insurance

Creating a comprehensive budget enables you to maintain better financial oversight from the property’s acquisition and setup phase, even before rental income begins flowing regularly.

4. Mortgage Obligations

When determining your rental rate, consider your mortgage obligations. Most lenders will expect you to set the rent at 125–150% of the mortgage repayment sum. Additionally, they might require a 25% deposit when purchasing the property.

5. Acknowledge Your Duties and Commitments

Being a landlord entails various responsibilities to both your property and tenants. These responsibilities encompass:

Ensuring your property complies with safety standards

Staying current with maintenance and repairs

6. Negotiate the Price

Before submitting an offer for a property, it’s wise to engage in price negotiations. Sellers may be motivated to expedite the sale, making them open to accepting a lower offer. Reducing your initial property investment leaves you with more funds for potential renovations or improvements.

7. Resale Potential

While renting out the property for a steady income is appealing, you should also consider its resale potential. Evaluating this factor during property selection could prove beneficial if you intend to sell for a profit in the future.

8. Landlord Insurance

Managing rental properties can be financially rewarding, but it comes with inherent costs. Some expenses, like tenant-caused damage or rental income losses, are beyond your control. This is where landlord insurance becomes invaluable.

Landlord insurance provides protection against unforeseen expenses, including accidental or malicious damage, coverage for vacant properties, or rent guarantee in case your tenants default on payments.