This is the million dollar question it seems at the moment! With house prices set to continue to rise and interest rates still at a record low, now should be a great time to invest in property. There are still some interesting prospects out there to start on a buy to let project or expand your portfolio, but what to buy?!
In order to answer that question, you need to firstly understand the reason why you are wanting to invest in property. Is it for long term capital growth (eg a 25 year plan) or looking to have a decent yield on your return on investment (which will give you more of a monthly income)? This probably the most important part of the process, as the reason you are investing will determine where and what you buy and ultimately how successful your investment will be.
The second question is how much do you want to spend, what is your budget? Usually most people would be looking to obtain a Buy to Let mortgage to fund the purchase, so this will also determine what type of property you will buy. Most lenders now will want to ensure that the rental income will cover a certain percentage over what the mortgage payments are (these are called stress tests, in case the economy takes a southerly turn again!). As an example, a lender probably wouldn’t entertain a purchase price of £200,000 with a rental income of say £650pcm.
Example 1. Landlord is in their 30s and has a long term plan. The budget is £125,000. Here we would be looking for a property that would attract long term professional tenants, close to good transport links (such as M4) or places of work (Hospitals, Universities) They will probably be willing to compromise on the yield a bit more in favor of long term capital growth the property can provide.
Example 2. Landlord is wanting to achieve a yield of 7% or more with a budget of £80,000. Here we would be looking for cheap and cheerful 2 bed terraced property around the city center, such as Landor or Plasmarl that would rent for about £475pcm to attract the younger market.
Here is a good example of a property that could yield 6.6% if it was purchased for £95,000 and would rent for £525pcm. Manselton, £99,950
If you are looking to invest this year and would like some free advice, please feel free to book an appointment either in the office or over the phone. If you have already seen something that has taken your fancy, why not email it over to me and I can let you know my thoughts – email@example.com
Happy Investment Hunting!