Make 2018 a Successful Year in Property Investment

Questioning whether property investment is the right move for you? 2018 could be the year you finally take steps towards becoming a landlord, investing your money into bricks and mortar. For those already renting out property, it could be time to expand further. Though recent changes in tax relief and stamp duty have eaten into rental returns for some, when considered carefully, property investments can still pay off.  Follow our top tips below and make 2018 a successful year in property investment.

Find the ideal location

You may have had your eye on an up-and-coming area for a while, monitoring positive trends in property sales and rental yields, giving you enough confidence in an area to invest there. If not, get out and do some thorough research on a few different areas. These could be local to you or further afield – largely dependent on how hands on you want to be and if you will be looking after the property yourself or if you have the budget to appoint a property manager. Often it’s not about looking for property in the cheapest or most expensive areas, but noticing which areas are growing in popularity and where people want to live – whether it’s for easy commuter access, proximity to good schools or in popular student pockets.

Do your sums beforehand

Consider all of the costs associated with the purchase of your investment property. This should include all the expenses incurred when purchasing the property such as stamp duty, legal fees, building inspection costs and bank and mortgage expenses. Ongoing expenses will include water and council rates, property insurance, repairs, maintenance and things like accountancy costs and agent management fees if you are outsourcing in these areas. There are also costs to do with safety and legal responsibilities, including gas safety certification, energy performance certification and tenant deposit protection – smaller but essential costs to keep in mind.

Mortgage matters

If you’re already a homeowner, you’re much more likely to be accepted for a buy-to-let mortgage. Buy-to-let lenders typically want rent to cover 125% of the mortgage repayments and many now ask for 25% deposits, or even larger, for rates considerably higher than residential mortgage deals. However, there are some good rates to be found so shop around for the best mortgage deal available to you. You need to carefully calculate how the costs of your investment property and its mortgage repayments will correspond to anticipated rent.

It’s also worth remembering that most landlords face periods between tenants when their property sits empty. As well as the budget considerations discussed above you also need to be prepared for instances where you are paying two mortgages (your own mortgage and the buy-to-let one) without rental income to help offset the costs – although keep in mind there are special insurance products to help protect you in situations like this.

Decide your target market

Once you have honed in on an area for your property search, you will start to get a clearer picture of who your ideal tenant will be. When viewing potential properties keep your target audience firmly in mind, it’s easy to forget it won’t be you who is staying there. If you are near to a university or college, it would make good sense to look for flats suitable for renting to students, so the properties you are viewing will need to be comfortable and clean but could be more basic. If you are looking in a popular family area, the properties need to have enough space and be near to schools and local amenities. Again ask yourself how much work you are willing to take on, flats and starter homes will generally see a greater turnover of tenants and require more work to fill, however 2 and 3 bedroom homes may keep longer staying tenants.

A fixer-upper project or move-in condition?

How much time and money you have to invest will shape the decision on whether to buy a property that’s in move-in condition or one that’s needing updating.  In a newer property that doesn’t require work, you will have paying tenants in quicker and there is less chance of having to invest in larger maintenance jobs needing done in the future. However, the price of outdated properties or those needing renovation can often be successfully negotiated, leaving you with a bargain to then spruce up and add value to. Adding value to a home straight away also gives you a greater margin of safety on your investment if the price is low enough to cover refurbishment. A good rule to follow is the property developers’ rough calculation, where you want the final value of a refurbished property to be at least the purchase price, plus the cost of work, plus 20 per cent.

As one of the West of Scotland’s longest-standing estate agents, we have had lots of experience managing the ups and downs of the housing market in recent times, so you can be confident you’ll be in safe hands when working with us. With an expert team by your side and a variety of properties on offer, including both property to let and homes for sale, Caledonia Bureau are confident that we can match you with the right home. Give our friendly team a call today, choosing from our offices in Clydebank, Helensburgh, Dumbarton and Paisley.

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