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How To Choose The Best Buy To Let Properties - To Maximise Your Returns
What makes the best buy to let properties so great? And which properties give the best
return for your investments?
Property is no longer a short term gamble on quick capital growth gains... For many
investors it has gone full circle and is now back to how it should have always been....
all about the cashflow and the security of the asset.
Arguably therefore with cashflow in mind, one of the most important factors when considering
property as an investment is the rental yield.
However it's no good just having a yield on paper that looks great, it also needs to
be achievable.
This is why choosing the right property is key... because reducing expenses (minimising
rental voids, arrears and even maintenance) and maximising return, can both be achieved
by selecting the right tenants and the right style of property, early on in your search.
Reducing Property Expenses
So the first part of the equation (where the style of the property plays a large role)
is in reducing your expenses. Maintenance can be a big part of this and the age of the
building and style will certainly affect it.
Regardless of where you invest you will notice certain property styles will tend to dominate.
Medieval York, Georgian Bath, Regency Brighton and Victorian Manchester are just some of
the styles you will see that define an area.
Add to the mix the range of 1930's housing estates, modern flats or ex-council developments,
and you start to see the array of choices you have for your buy to let investment.
So which property style is best?
Well that depends on your area as to which property styles you have available, and also
your personal strategy (are you looking for a refurbishment project or a ready to let
investment?).
But to reduce your ongoing costs you need to consider that each of these property styles
come with their own challenges for maintenance.
It goes without saying that the newer the building, the less costs you should incur,
but one caveat to this is with new build flats. Typically these come with high service charges
and large ongoing maintenance funds which can easily eat in to your rental yield and
property profits.
Ex-council houses are generally very well built and were maintained well by the councils
until many passed in to private ownership in the 80's & 90's with right to buy schemes.
These can make great investments in the right areas, as they also have good room sizes and
large gardens, which tend to attract long term family tenants.
Many larger Victorian terraces (like in the Manchester area) can also attract long term
tenants, as the style, layout and size provide fantastic space for couples and families alike.
Depending on your appetite, there's also a case for short term tenancies and room lets
as these can provide very high rental yields, but for reducing costs and keeping rental
voids and maintenance low, there's no substitute for long term tenancies.
So often it can be best to focus on properties and homes which can provide for this market
with good sized bedrooms and space for tenants to grow in to.
Therefore to reduce your expenses, it's important to consider the property styles
in your area that have less associated ongoing maintenance costs and will suit longer term
tenancies (traditionally families or older tenants), if you want the best buy to let
properties for your investment.
Maximising Returns
Rental values have grown consistently in the UK since 2009 as shown in many industry reports
including the Homelet rental index, which shows rental statistics broken down by region.
With rental becoming the only option for most residents, tenant demand is high for all property
types.
But in an April press release from the UK's largest lettings agent, Countrywide, they
state that one and two bedroom properties provide the highest rental returns for investors.
I can see why the figures behind this back up the report, as larger properties are typically
higher in value, and the increase in property value doesn't always correspond to a proportionate
increase in rental income, hence the differing yields.
However from experience what I have personally noticed is that many tenants in smaller properties,
tend to stay for shorter periods of time, because as their needs change, so do their
demands for the property size.
Often these tenants move on for work opportunities, or because they have out grown these smaller
properties with their family.
These properties therefore tend to have a higher turnover of tenants, which leads to
greater costs with tenant find fees and rental voids.
Conclusion
The best buy to let properties for maximising returns ultimately depends on the rental yields
for your area (a number of areas in the North West will achieve around 8%+ yields) and which
tenant profile has the most long term demand.
But as a rule of thumb, 2 or more bedroom properties and homes with gardens tend to
attract more long term tenants.
So when it comes to maximising your return on investment, it's not just about the headline
yields... it's also about reducing costs and making sure the property investment you
pick, will fit the ever changing needs & demands of your area's tenant market.
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It would be great to hear from you,
What house styles and sizes do you prefer for your buy to let properties?
let me know in the comments at the bottom of the page
Interested in investing in property, but you need help in finding the best deals? Then
check out Tailored Property Sourcing