As the new tax year has arrived, many are now looking at the next 12 months and wondering where to put their money to achieve the best returns. The government has announced a number of new tax cuts through ISA’s but these schemes offered by the high street banks often offer fairly inconsequential returns on interest and aside from stock market speculation there really is little else on offer aside from property investment.
Thanks to the potential for both capital appreciation and rental yields, property remains the go-to investment option for many. Although the process can be stressful, there are now a number of ways in which those looking to enter the buy-to-Let market can reduce stress, not least by approaching a reputable agent to assist them.
First time landlords are under extra pressure to ensure that their investment is in the right area, has the right transport links, the right features and is in a state fit for human habitation. With that in mind we’ll answer some Frequently Asked Questions:
Q. How do I know which are good areas to invest?
There isn’t a specific tried and tested formula to get this right, but there is good advice out there for what to consider when looking for a buy-to-let investment. When looking for a promising investment, the initial price of property in an area is often not the most important consideration. A promising investment opportunity is one in a place where people would like to live, and this can be for a variety of reasons.
For example, if you look at investments that are reasonably close to where you live anyway, which areas within your town or city are desirable? Why? It might be that transport links are good in certain areas, or that a property has good access to roads which provide an easy route to the nearest big city. It might be that houses in a certain area of the town have bigger gardens and provide a quieter living environment.
You should consider who you intend to rent to. If you are looking at a three bedroom semi-detached house in a quiet area of the town then the likelihood is that a family will be the most likely tenant for your property, whereas an apartment or small property close to busy transport links and amenities is likely to attract young professionals living alone or sharing with a partner or friends. Which type of tenant would you prefer? You can affect this with your choice of investment.
Q. What should my target be?
Most investors who have been successful advise against trying to select areas with the biggest or quickest capital gains or price increases. Despite the temptation to ‘flip’ a property in three to five years the age of quick profits has largely gone. But while you may expect long-term house price rises, experts say invest for rental income rather than short-term capital growth. To compare different property’s values use their yield: that is annual rent received as a percentage of the purchase price. For example, a property delivering £10,000 worth of rent that costs £200,000 has a 5% yield. Rent should be the key consideration when looking at a buy-to-let investment.
Q. Should I use a letting agent?
Appointing a good letting agent is highly recommended. If you are a first time investor then you should absolutely consider making the most of reputable and affordable local agents. Buy-to-let is generally a learning curve and most new landlords make mistakes which end up costing money. With the ability to ask for advice, have your home tenanted and maintained on your behalf means that you can essentially eliminate the majority of mistakes that new landlords make.
Maintenance, understanding the law and finding reliable tenants are usually the biggest obstacles that new and even long-term landlords face so it’s well worth eliminating the stress by using the services of a decent agent. For more information on the service offered by Intus Lettings, please click here.