WHY BUY-TO-LET INVESTORS MUST BUY PROPERTY WITH THEIR HEADS, NOT THEIR HEARTS

Published 16 April 2018

Heart versus head webDespite tax and stamp duty changes, residential buy-to-let remains a popular choice for investors, especially as interest rates remain stubbornly low, giving poor returns on many other forms of investment. 

The first time buy-to-let landlord often assumes that the best kind of home to buy as a residential rental property is one that they themselves would want to live in.  That is generally a big mistake, as what tenants look for in a home, and what homeowners buying their ‘dream home’ look for, are often very different.

Owner occupiers often buy with their heart, purchasing aesthetically-pleasing homes in idyllic, sometimes remote locations, and being prepared to invest time in improving and maintaining their property for the long term.  This is the antithesis of what a tenant wants, and it is vital that buy-to-let purchasers try to put themselves in the tenant’s shoes when they choose their investment property.

One of the most important considerations is location – close to amenities and transport, and within striking distance of employment areas.

At the moment, anywhere in the city is a good prospect, especially areas where growing disposable incomes amongst residents is attracting new shops and small businesses.  Some North Norfolk towns are seeing an emergence of new developments and these are always a very good option for buy to let, “turn key” landlords. Sometimes north Norfolk towns are overlooked by buy-to-let landlords, but quite often you will find that going a few miles out of the City will offer better value for money and allow for excellent capital growth potential.

The type of property is also vitally important.  Tenants want practical, clean, well presented and economical to run homes.  Typically, they don’t want to spend their time maintaining big gardens, so smaller gardens or courtyards, or even communal gardens, are a good bet.

Ease of maintenance of the property is a big plus for both landlords and tenants too, and for this reason modern properties should be high on the shortlist; these also tend to be more energy-efficient (particularly important with the new EPC regulations which have just been introduced), so they appeal to tenants.  Both townhouses with small gardens (appealing to families) and good quality apartments (attractive to young professionals) are worth considering – parking is a big bonus in either type of property.

The key thing is to view any potential investment property through the eyes of a prospective tenant, and that means very much buying with your head and not with your heart.  Save that dream house purchase for your own long-term home!

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