At £1.25 trillion – £1,250bn – the value of the flats and houses owned by almost two million small-time landlords is catching up on the £1.6 trillion total amassed in workers’ pension schemes,’ reports the Telegraph. But that said, the life of a landlord is not a simple one.
If you are a new landlord, or considering investing your savings into a buy to let property, you might be wondering whether you should invest in a single property that will offer high returns and low levels of maintenance, or build a portfolio of smaller properties that will require management.
The first thing you need to do is decide what you want out of your investment. Is this going to be your primary income? Or are you looking for a secure place for your savings that with the right care and due course will appreciate in value?
If you sit in the former camp, a portfolio of lower yield properties might be the correct course of action. If we consider these buy-to-hold, and that you’re not a property developer who’s in the market to renovate and flip properties back on the market, then you’ll need to carefully access your finance and above all, start small. If you aren’t a cash buyer, you’ll need to find a buy to let mortgage, of which there are many, all of which are designed to ride the short-term ups and downs of the rental market.
If you’re looking to build a portfolio, like any landlord, you’ll need to think about who you want in your properties, as this in turn will dictate where you buy, especially if you’re a London based landlord. Can you get in quick on the next upcoming area for affluent young families? Or do you want to invest near a university and service the ever present, but high maintenance, student market? Some landlords are being lured by the admittedly tempting offers of investment in purpose built student accommodation, with investors being guaranteed returns of nearly 9pc for five years. However, you’ll often need cash and the properties are often sold off plan before they’re completed.
If, on the other hand, you’re looking to squirrel away your investments in a single prestige property, there are some differences. You want to maximise your capital gain from the property against the rental yield, while, let’s assume, you maintain a more hands-off approach to the property.
Like owning multiple buy to let properties, you need to think about who your customer will be. In case of a single high yield property, you will likely be looking for longer term tenancies, between eighteen months and two years. Your target audience will be young urban professionals, or, even better, a new family.
You’ll want a new build or a recently renovated property, this will hopefully ensure there won’t be any surprising and costly maintenance down the line. Avoid large family sized homes as these are often difficult to let, instead seek out the evergreen two-bed in a nice area. And if you’re going to be using a lettings agency to manage your property, make sure you do your research and don’t settle for the first offer.
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