How To Make The Right Buy-to-let Investment

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Finding an asset that will reward you with a good level of capital growth and rental yield is far from straightforward. If it was, people would probably invest in little else.

That's why planning and research are imperative to the success of your buy-to-let venture. Long before you even start to look at available properties and pinpoint your ideal locations, you should understand what might appeal to tenants and learn your role as a landlord. Then, when it comes to finding your property, you'll be fully aware of what you're looking for.

To ensure buy-to-let comes good for you, here's a collection of pointers to aid your search for the dream rental property.

What tenants want

It is a landlord's responsibility to keep their property safe and free from health hazards. This includes ensuring all gas and electrical equipment is safely maintained, providing an Energy Performance Certificate for the property and following fire safety regulations. Once the tenant's deposit has been protected in a government-improved scheme, this is the bare minimum covered.

You're also required to supply power and hot water. Beyond this, you must think like the tenant you're targeting to provide them with the best space. What would you look for?

The house has to be clean - not just after a quick tidy up, but in general. New units and furnishings in the kitchen, bathroom and lounge will do wonders in this area. At least one double bedroom is a must, the same applying to showers, some form of dining area and free parking. One space for a car might suffice but the more the merrier.

Such features will come in handy when your prospective tenant is browsing your property's list of provisions. However, if your house isn't much to look at from the outside, they may not even get viewed. So always assess its curb appeal, too.

Type of property

Once you've found your target tenant, you can bear their requirements in mind when searching for a property.

Students like large houses with lots of equal sized rooms, as they want to spread the costs between several people without someone ending up with the 'box room'. Detached houses with three to five bedrooms are ideal for this type of group.

Young couples are more content in flats, as they often come with little luggage and therefore don't need the extra space. Meanwhile professional sharers are usually young single people who cut rental costs by living together, so any well-maintained property with two to three bedrooms should attract some interest.

Locations

When experts say 'choose a promising area' they don't mean buy a house in an affluent location or in a particularly run-down one. Promising essentially means a place where people would like to live - and this can be for a number of reasons.

The town or city has to have a special type of appeal, often determined by the tenants that are being targeted. So the best thing to do is draw up a checklist of the type of offerings your target market would like to see and tick the boxes as you circle around each area.

Students, for example, might like to be positioned next to the local night spots, while couples that work in a nearby city could be tempted by a park where they can unwind.

Generally speaking, a promising area can be defined by strong transport links, good schools for young families along with plenty of 'nice to haves', like shopping centres and restaurants.

Your investment

Although it would just seem like a case of judging each by their listed price, one of the most comprehensive ways of comparing property values is to think in terms of yield.

This is the annual rent as a percentage of the purchase price. So, a property that earns £30,000 worth of rent after being bought for £300,000 has a yield of ten per cent, making it a shrewd investment if you can get tenants into the house.

Just remember to also take into account any additional costs from your property. From looming factors like your mortgage repayments, right down to running costs like repairs and utilities (on Leasehold properties Landlords pay for any maintenance charges). Use yields to properly assess the value of each property rather than assume they represent a good investment. Also, don't forget that you may not have a tenant in place for 12 months of each year - landlords are often encouraged to work on the basis of getting nine months rent.

Exit strategy

Buy-to-let is a pretty safe route to take with your money in the grand scheme of things provided it is viewed as a long term investment, although having an exit strategy in case things do go wrong will give you added peace of mind.

In fact, your exit strategy could even determine where you'll buy. If you're in an area where people are buying already, you should not encounter too many issues trying to sell your property later on. However, if it's in a neighbourhood where people aren't buying, it's value as an investment logically drops. Do your research on activity around the street and you should be able to decide on the best plan of action.

To ensure you cash in at the right time, keep an eye on your capital growth and income targets, which will let you know whether you've invested in the right asset. Just don't forget to view your property as a business, and one which won't thrive from the owner letting it run on its own.