There’s no doubt about it — if you want to increase your income, investing in property is a smart step to take. The UK buy to let market is thriving, with more and more people recognising the potential returns that owning an investment property can bring. If you feel like you’re ready to take the jump and become a buy to let investor, here are a few things you need to know first.
Rental yields are important
If you’re unfamiliar with the term rental yields, it’s time to get familiar. A rental yield is a percentage that’s worked out based on the cost of your property and the cost of rent. For example, by taking your potential annual rental income (the amount your tenant will pay), dividing this by the property’s purchase price, and then multiplying your amount by 100, you’ll be left with a percentage which makes your rental yield.
Different areas of the UK have different average yields. For instance, Liverpool and Manchester are the UK cities that tend to have the highest rental yields, with property companies like RW Invest offering opportunities in these cities with yields as high as 7 and 8 per cent. The higher the rental yield of your property, the more money you can expect to recieve through rental income each month, which is why it’s so vital to research this before investing.
So is capital growth
Along with rental yields, capital growth potential is another major element to look for in your investment property search. Capital growth refers to the level of appreciation your property value sees over time. Like rental yields, this growth is more likely in certain areas, especially those with a strong economy and exciting regeneration plans in the pipeline. The north-west scores points in this area too, with Manchester and Liverpool boasting the highest rates of house price growth in the UK.
Wherever you choose to invest, make sure your property is based in a thriving and promising location. You might buy a student house in a run-down area just because it has high rental yields, but when it comes to selling the property further down the line, you may not see any increase in value. Always factor capital growth into your investment strategy to ensure you’re getting the most out of your venture.
Decide whether you want a hands-on investment
Just because you own a buy to let property, that doesn’t mean you need to take on the responsibilities of a landlord with a ‘hands-on’ investment. Being a landlord can be challenging and time-consuming, which is why many investors choose to hire a property management company to take on this role. With this, you’ll pay a little extra for an external company to take care of things like sourcing and communicating with tenants, and responding to any queries or concerns the tenant might have after they’ve moved into the property. While this can cost you extra, it might be worth it if you don’t think you have enough free time or patience to deal with the management side of the investment.