What makes a good investment property?
First, do some homework. Investing in property is usually about capital growth, so you want to choose a property where you expect prices to increase. You can also add value to the property by converting the loft, building an extension or even converting the front garden into off-street parking. However, before getting carried away with making changes, buying at the right price is absolutely critical. You should seek advice and research the market thoroughly.
You also need to ensure that the property will provide you with a steady rental income stream. This cash flow will make holding on to the property (your asset) more affordable, so you won’t be tempted to dispose of it too soon to make a good profit. To make certain of a steady rental income, you need to know your target market, so that you can choose or alter the property to suit the demographics of renters in the area. For example, if it is near a university, then more bedrooms will be in greater demand than a large garden. On the other hand, a family home with a large garden and close to schools and parks will be more desirable if it is on a quiet street than on a busy road.
Do your sums – you need to understand the running costs of owning a rental property (insurance, repairs, tax). Choose the right finance, calculate and fully utilise any landlord tax savings – a good agent or tax adviser would be able to direct you – and also ensure you are able to cover any mortgage payments should the property be vacant at any point (during future renovations or unexpected voids).
A good investment property is attractive to tenants, the property should be furnished with your target market in mind, not your personal taste.
Lastly, find a good letting agent and property manager – and let them do their jobs! It can be difficult to treat a property as an investment (rather than your personal home), but a successful landlord is one who is willing to take sound advice and be flexible, ideally taking a long-term view.
This is one of the 50 most asked questions in our new book: Landlord Intelligence