Since the advent of the buy-to-let mortgage in the 1990s, many thousands of people have invested in a property to rent out.
Some have gone on to acquire multiple units and become professional landlords.
Others find themselves becoming “accidental landlords” – as when a temporary job move takes place and the family home needs to be let for a period of time, or when an inheritance results in a property becoming available to hold as an investment. Rental property is increasingly popular and this top tip guide from OnTheMarket.com aims to help less experienced landlords to understand what makes for successful letting.
1. Buying an investment property – not the same as buying a home
The criteria for buying a property to let are considerably different from those you might apply if buying a place in which you would live. For example, as a long-term owner-occupier you might have very personal tastes in strong decorations or would choose somewhere with a big garden. Many tenants will prefer a property with neutral decoration and a small garden that won’t take much maintenance. An investment in rental property should be ruled by the head rather than the heart and be treated as an unemotional business decision.
2. Where to invest in property – find the best locations
If you are considering buying an investment property, assess locations that are most popular with renters. Ask the local letting agents which areas are sought-after, and why. Tenants are often attracted by locations with plenty of employment opportunities or good communications for commuting to nearby towns and cities. University students are ready-made tenants and the correct type of accommodation near to their faculty should always let well. Students often share properties and these “houses in multiple occupation” (or HMOs) are sometimes subject to special legal requirements, including licensing, registration and inspection by the local authority. Make enquiries of them before proceeding. Keep an eye open for local news that could affect the demand for rental properties – such as big company relocations bringing lots of new potential tenants, or the opening of a motorway or rail link that will increase the popularity of an area.
3. Choosing the property – to meet the demand
Talk to local letting agents about what type of properties are most popular with tenants. It could be family homes, flats, or student accommodation. Ask if there is a shortage of a particular type of popular rental property and go looking for one to buy – it should then let quickly. Look at OnTheMarket.com and see the types of property being offered for rental. Sometimes properties are for sale with a tenant in already in place. That really can be a big help! Watch out for new housing developments being built in the area. They could bring a glut of rental properties onto the market and potentially cause a supply surplus that might affect future rents. As with purchasing a home, buy the best rental property you can afford, in the best area for demand and future growth.