Property Menu | Mortgages | No Money Down | Calculate Yield | Free B2L Book
Buy to let guide - How to find an area to Buy To Let, By Lady Lea
Investing in property to rent out can be a nightmare for the new property investor. With so many companies supplying 15% gifted deposit deals, and discounted bulk deals, it's easy to be swept along and miss the whole point in your investment.
The point of investing your money into buy to let is to make a passive income, in a fairly safe way.
By going down the route of hundreds of other new investors, and jumping on a bandwagon of discounts and deals, some investors are getting stung and having trouble competing with several other landlords, wanting to rent out their 6 / 10 or 20 plots on the same development.
There has been a theory passed onto investors by "keen" seminar companies who package deals up, and find it in their interest to teach to you to invest in new-build, because they are making more money out of their delegates. They encourage you to join their "club" so you can save money. What is happening in reality is that you may end up buying a plot or two in a block of 350 flats, and be the last one to rent yours out!
What you should really be looking not supply of property, as anyone can offer you property. You should be looking for high rental demand - something you have to look for all by yourself! Here are a few pointers to get you started...
Back To The Top
1. Understand rental demand and how it will affect you. An area with high rental demand has more tenants than properties. Tenants end up on a waiting list to rent.
An area of poor rental demand has a lot of available properties and fewer tenants. Landlords have to drop rents to compete or risk having long void (empty) periods. To let your property, you need to buy in an area with high rental demand. It's as simple as that!
I was talking recently to new investors. One told me they had found the perfect property to rent. It was in a nice block with two parking spaces, close to a park and a few moments walk from a "good" tube station. I asked what made them think it would rent. They told me
about all the local amenities - but did not once mention if there was any demand in the area or if there was already a good supply of properties to let. A good rental investment is feeding demand with supply. Not supplying and hoping!
2 . Know the properties to avoid. A common idea that many first-time investors have is to buy a particular type of property - often one that takes their fancy. They say they have set their heart on buying ex-local authority houses or new build apartments in the city or whatever. What they have forgotten is that they need to actually look for a demand and then buy for that demand rather than simply supplying what they fancy and hoping it rents.
Another common problem concerns property hotspots. When a particular area is published in the media as a hotspot, you will soon find that lots of investors will go there to buy. They are not considering each other, the affect on the market and mostly not checking if there is any real demand for letting. They've just read somewhere that it was a hotspot! Hotspots, in my opinion are really to be avoided because of the rush buying and flooding of an area. These are not places that I would consider to be low risk.
3. Searching, how to start. The best way to identify an area to buy to let is to get a map and draw a horizontal line across the centre of the UK . The North is more likely to have high yielding property with slow growth. The South is more likely to have faster growth with lower yields. Take a pin and place it into any random location (depending on your budget - North being mostly cheaper). Once you have pinpointed an area, do a search for local letting agents via www.google.com on the internet or via 'phone books in your local library. Call agents to ask if they have a demand for a particular type of property and/or waiting lists of tenants. Keep calling until you find an agent with high demand. Once you have your area and property type, check auctions and estate agents etc to see whether properties are within your budget. If not, keep moving your pin and calling until you find a suitable area.
4. Doing your legwork. You need to meet letting agents to identify demand. You also need to identify roads that are easy to let and roads to avoid. It is important to ask the right questions. Most people will ask "What will a property rent out for in this area?" That is a good question but needs backing up with "How many have you got available on the market now?" This will help you establish if a property there is going to face competition. Agents don't know everything - so don't accept everything at face value; do some additional research in the local property papers, see how many properties are up for rent.
Buy a local street map and a couple of highlighter pens; one green, one red. Highlight good areas in green and bad in red. You need to pound the streets to get a feel for each area. Drive or walk down roads, noting details from 'For Sale' boards. Look for small private sale or letting boards and make notes of house numbers for future use. Even look for boarded up or vacant property that you might research with the land registry, to see who owns them.
Back To The Top
5. Keep working. Hold onto the papers you bought for your letting research as you can use it later for comparables. Put yourself on estate agents' mailing lists using www.estateangels.co.uk and going into the offices if your on a visit. Save business cards so you can keep in touch with your newfound agent "friend".
When planning a trip to see property agents, have some business cards
with your postal address, phone and fax number and e-mail address so you can hand these out. You can print off cheap cards at shopping centres and services on the motorway, or get free cards from www.vistaprint.co.uk.
