By Bretton Johnson
Considering investing some of your capital into a buy-to-let property? Investment in this asset class is known as one of the most lucrative and secure methods available, but there are still things that can go wrong if you’re not sure where to begin.
Are you a first-time buyer looking to invest in the property market? Consolidated down for your consideration, here are five of the key ingredients that you must accommodate in order to achieve a successful property investment formula.
Tenant demand
If you’re investing in your property as a buy-to-let endeavor, then it is imperative that you make sure that there is a sufficient number of people that actually want to live in the area. There’s no point buying a house to rent out if no-one wants to live in it anyway. To ensure you find the right location, you should look at the statistics in the area, and think about the location of your potential purchase in relation to what tenants
Typically, a bankable suggestion would be to invest in accommodation in a popular student city, such as Manchester. This would ensure a stable and consistent demand of potential tenants to live in your property, reducing the risk of void periods in your income stream.
Rental yield value
If you want to make fast and high returns from your investment, then you also need to make sure that the area you’re investing in has above average rental yields. A good rental yield in the UK is around 8% or above, which is quite difficult to achieve, but a figure around that number will give you a strong passive income each month.
Capital Growth Potential
The capital growth potential (also known as capital appreciation) is how much your property is due to increase in value in the coming years, and serves as a good indication of whether your property has longevity. If your investment property grows in value over time, then it will allow you to charge more for rental payments, and you can even sell the property for much more than you originally bought it for.
Buy-in price
Make sure you’re not paying a massive amount for a property that could take years to recoup the majority of your initial spend. You don’t want to be paying over the odds for a property with a low average rental yield, and that’s why many are avoiding London at the moment in the UK, as its prices are extremely high, while rental yields and growth on house prices are stagnating.
Northern cities such as Liverpool and Manchester are a great alternative, and property investment companies such as RW Invest offer a variety of property types in these areas, depending on your budget.
If you want to ensure you’re getting a good deal on a property in the area you’re interested in, consider going ahead of the curve and investing in an off-plan development. These properties, still in their planning stages and construction, offer early-bird access to promising markets that are set to thrive (helping with the promise of sustainability), and are usually offered at below-market value.
Sustainability
If you’re concerned about the sustainability of your property due to market trends, then make sure your investment portfolio is diversified in the future. This will help you to weather the storm should your real estate investment take a dip in value, as it will be bolstered by some of the other properties you have control over in differing areas.
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