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Choosing the property

Choosing the property

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Some people choose the type of property they are looking to acquire before they choose an area, then look for residences of that ilk in their selected locality. Others consider the area first, then think about particular properties after that. As you will have already read if you are reading this section page by page, it is not wise to make blanket statements about the type of property that is suitable for buy to let. The demand for particular types of rental property will vary according to the area.

We have already seen that you should think about the area from the perspective of your prospective tenants. The same is true of the property itself. Put yourself in their shoes - what will they need? Does it have a parking space? Is there good access to local public transport? Is the property homely? Will the sort of tenants you are trying to cater for be happy in this property? For instance, if it's a family home, does it have a garden? If it is for sharers, does it have a large communal area? You have to think about these sorts of things and not be blinded by how much the property appeals to your own likes and preferences.

If in doubt, go neutral
You should try to buy a property that will be as attractive to as many tenants as possible. That way you should be able to minimise the void periods during which the property is empty and get the best long term return from your investment. This means aiming at the largest or least catered-for tenant group in an area and making sure that the property is up to the standard that they will be looking for. Quirky or unusual properties, or outlandish décor may attract a tenant that falls in love with it, but it is just as likely to remain empty.

Don't make work for yourself
Some factors and features may make a difference to the selling price of a property, but have little effect on the rental income. Large gardens usually attract no more rent than would a small garden. Not only that, but most tenants probably won't look after the garden as you might wish. Generally it is best to avoid properties with high maintenance requirements as any special needs will undoubtedly end up eating into your long term profits.

Rental yield
Although statistics sometimes lie, they do show that on average, cheaper properties generally give a higher yield than do expensive ones. It may well be worth your while investing in a number of smaller or cheaper properties than in a single more expensive one. Not only does this spread the risk of having all your eggs in one basket, but it may actually mean you have better returns in the long run.

Property-yield combinations
Different areas will have different sorts of properties available. The rules below do not always hold true across the country, so you should always think about the individual property in conjunction with the area as a whole.

Ex local authority housing often provides the highest yields, sometimes generating as much as 20 percent of the property value in rent each year. However, you may find that when your tenants move out, the void period is slightly longer, as some people are put off by the external appearance of particularly unsightly ex-council blocks, despite them having large flats with good sized rooms.

The lowest yields tend to be on three or four bedroom houses in reasonably affluent areas. The market for this type of property is very much smaller than for one or two bedroom flats, and you may find that this type of property is difficult to let. The upsides are the capital appreciation on the property you are likely to enjoy, and the fact that rents are generally pretty stable on family homes in suburban areas.

Many investors buy flats, as they can be easier to let and often have a higher yield than other types of property. if you do go for this option, you should make sure that the managing agents for the block are responsible and respectable. Preferably, they should be members of ARMA, the Association for Residential Managing Agents. This will give you a direction in which to vent your anger and frustration if you feel that they are not doing their job. If possible, you should check the upkeep of common areas and the outside of the block before you commit to buying. Avoid buying in a block where the common areas are not well maintained or where the adjacent buildings are run down.

Similarly, you should find out what the ground rent and service charges are for the property. These are sometimes overlooked as costs for investor buyers, but they shouldn't be. You cannot expect that the tenants will be willing to foot the bill for these.

New or old?
You have to decide whether to buy a new home or an older one. Many experts believe that a slightly older property represents better value, as buyers tend to be paying a premium for new homes these days. Either way, make sure that you choose the general area and the exact location carefully and go for a property with lasting appeal rather than one that panders to current fashion.

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