Riding the property wave

Posted on: May 7th, 2015

Research published in May this year by HSBC has shown that Southampton offers the highest rate of returns for buy-to-let and property investors, with Portsmouth following closely in eighth place. With confidence in the property market gathering pace, Karen Webb, Coffin Mew’s Partner for Residential Property and New Homes, shares her top tips for those looking at an investment property.

Location, Location, LocationRiding the property wave infographic

Choosing the right location is paramount. If aiming for student lets, you will need to be close to a university. If professional couples are your target you will need to be close to a town centre and good transport links. Families, obviously, will want a larger property, with a garden and close to schools.

Research the market?

What is the available housing stock and what rents are they achieving? Do not be afraid to talk to local letting agents and other landlords. You may need to look a little further afield than your own hometown.

Financial homework

Buy-to-let mortgage lenders will be looking for rental income to cover 125% of mortgage payments, and many will demand chunky deposits. Shop around for the best deals, and do be prepared to negotiate. Investors should also allow for, on average, two month void periods in any given year, and these will need to be factored into your projections.

Haggle and negotiate

Buying for investment gives you the advantage over a buyer in a chain as the sale is less likely to fall through. Use this to your advantage and negotiate the price downwards.

Buy with your head, not your heart

Remember that you will not be living in the house, so it does not need to reflect your own personal tastes. While most people love a period home, a new build is likely to be less costly to maintain and run. The downside is that there might be fewer opportunities to add value.

Invest for the long term

While house prices are on the up, buy-to-let should be considered a long-term investment, taking advantage of rental income and capital growth.

Hands on or hands off?

Do you have the time to manage tenants yourself? Are you around to fix a leaky tap, repair a broken boiler, or deal with troublesome tenants? If not, consider a managing or letting agent. It will eat into your returns, but can be worth the additional expense.

Buying from auction

Always ask your solicitor to review the auction pack before you buy. This pack will include searches and reveal any potential problems – such as restrictions on multiple occupancy that would scupper any student let plans. If unsure, walk away.