Your comprehensive guide to acquiring an investment property…
Whether you’re trying to earn a monthly profit from a renter or want to see your money grow in capital investment, real estate continues to be a terrific option to generate passive income for investors. There are several things to consider before making the purchase, so read on for our top suggestions before making the plunge…
As with any real estate guidance, each property and buy-to-let scenario is unique, so be sure to seek specific advice before you begin looking into buying a home. Agents are frequently able to recognise a fantastic chance from a mile away and point you in the direction of it.
1. Determine your yield
A rental yield is a figure that indicates how much of an annual return you may expect to get on your investment.
Calculation of the gross rental yield:
Gross rental yield = (annual rent ÷ property acquisition price) x 100.
As an example… (£6,000 ÷ £150,000) multiplied by 100 is 4.4%
If you’re thinking about purchasing a rental property, figure out what kind of return you may expect to get from it to assist you in deciding if it has investment potential or not. To obtain an estimate of the expected rent for the house, talk to a rental agency in your neighbourhood.
2. Consider the possibility of capital growth.
It is also essential to think about how long you want to keep the property and how much its value could improve throughout that time period. At the end of the day, capital growth adds to your total return on investment as well.
3. Determine if there is a demand
Certain places and types of property are in more demand from renters than others. When looking for an investment property, it’s important to consult with a local rental agency who will be able to advise you on the level of demand in the region you are considering.
4. Look at convenience
Parking, accessibility to public transportation, and proximity to local attractions are all factors that will boost the desirability of a property to renters.
5. Increase the size of your target market.
Instead of purchasing a home that will appeal to a certain group of tenants, consider purchasing a property that will appeal to a broad range of renters. This will enhance demand, therefore assisting in the preservation of a high rental value and the reduction of vacant periods.
6. Stay away from big drawbacks
This can include difficult access, unusual layouts, excessive levels of noise pollution, dangerously steep gardens, and anything else that is likely to turn away prospective renters.
7. Calculate the cost of maintenance and repair services
It is important to consider all outgoings, including any normal maintenance and repairs, when determining what sort of property to invest in as it will affect how much net rental return to expect.
8. Take fees into account
You should include your mortgage re-payments, agency fees, the anticipated cost of landlord and building insurance, as well as the cost of rent protection insurance, if you plan to utilise it. It is common to see that leasehold properties are less expensive to purchase than freehold homes, but they often have yearly management costs and/or ground rentals, which must be included into your return calculation.
9. Keep the number of vacancies to a minimum
In the real estate industry, a void period is defined as the time during which a property is empty and generates no revenue. It is possible to reduce vacant times by selecting the correct tenants from the beginning and establishing a positive working relationship with these renters.
10. Have an Energy Performance Certificate (EPC).
Rented houses in England and Wales have needed a valid Energy Performance Certificate (EPC) since October 2008.
The Minimum Energy Efficiency Standards (MEES) went into effect on April 1, 2018, marking the first anniversary of its implementation. In order to comply with this requirement, all homes being rented or sold in England and Wales have to have an EPC rating of ‘E’ or above. From April 1, 2020, the Minimum Energy Efficiency Standards will apply to all existing tenancies – not just new ones or renewals.
By 2025, the government proposes that all rental homes must have an Energy Performance Certificate (EPC) grade of ‘C’ or above. The new restrictions will be implemented for new tenancies first, followed by all tenancies starting in 2028, similar to previous modifications. Before placing an offer on a house, be sure to check the Energy Performance Certificate (EPC).
Are you prepared to begin? Reach out if you’re interested in learning more about prospective buy-to-let properties in your neighbourhood or if you have any concerns regarding the process of becoming a landlord.
