Finding Buy-To-Let (BTL) Property
For those investors looking at buying or expanding their residential portfolio in the New Year here are 10 tips to finding buy-to-let (BTL) property. Landlords looking at bagging a property bargain also check out our tips on finding investment property. Before you plunge headlong into buying a buy-to-let investment do consider alternative to direct property investing that might be more suitable to your investment goals and style. With property investment just like any type of investment; potential landlords should understand the risks.
1. Targeting an area
The first essential thing a landlord needs to do when finding buy-to-let (BTL) property is to be selective on their area of search. There is a lot of buy-to-let property out there. The essential thing is to narrow your area of search to a part of town or even a few streets, otherwise you’ll be constantly chasing your property investing tail for little result. One of the best ways to do this is by employing one of the new features on Rightmove. This allows you to define and then draw an area of search. By putting a line around the part of town you want to buy in you can monitor properties and prices and look to strike when the price is right. Key is research and fully understanding the nuances of the market you are investing in.
2. Identifying the right buy-to-let property
Part of successful investing is finding buy-to-let (BTL) property for the types of tenant you want to let to. A good way of accessing the type of tenant you can expect from any BTL property is assessing the types of people that already live in the area. Are they the types of tenant you want? Landlords can use social economic databases available through Findahood to dig a little deeper and get a feel for the area behind the front doors.
A successful property investor can identify property that are going to rent well and achieve good rents whilst still being amongst the cheaper property thereby maximising your gross rental yields.
Remember that finding the right buy-to-let property is as much about understanding what makes a space attractive to tenants. One of the best books I’ve ever read at explaining the emotional connections that we have with space and property is Michael Pollan ‘ A place of my own’.
If you know somebody who is interested in property investment, it would make a great present along with checking out our property investment checklist.
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3. Do your figures stack up?
It’s essential that you do your figures including calculating your property investment returns. Do you know what your gross rent is likely to be? More importantly what about your net rent. Don’t get caught out by expensive service charges.
Have you allowed for a voids period and other charges? I maintain that in the current climate property investors should be aiming for a net yield of around 8%. In London it may be a percent or two less to allow for the better capital growth prospects. It is possible to increase your potential rental income and net rental yield by buying a House in Multiple Occupation (HMO) as a property investment.
4. Below Market Value (BMV) opportunities
Below Market Value Property (BMV) is property that is generally considered to be available at less than the current market price for that particular property. Finding a buy-to-let property is that is also a BMV property can represent a great way of starting your property investment portfolio. I have often heard that a property investor makes their profit when they buy not when they sell their BTL property.
5. Get a profile
Landlords who want to find the best buy-to-let property deals need to develop a profile with local estate agents. Being a buy-to-let landlord may seem like a fairly anonymous activity, but like any business it’s all about getting your name out there. Speak to estate agents and give them your requirements. That way you will tend to have first sight of the new properties as they come on the market giving you the best shot at finding buy-to-let (BTL) property investment bargains.
It’s essential that you get across the fact that you are keen to buy and that you are well financed. That means either that you are a cash purchaser or have ready access to mortgage finance. What estate agents want is a buyer with ready access to funds and who can deliver on quick straight forward transaction.
6. Access to finance
In the current climate cash purchasers are a very attractive proposition indeed, if not cash landlords need to be secure that their mortgage broker can secure them access to funds quickly. Work at identifying a BTL mortgage broker that you are happy with and know will deliver.
7. Talk to the owners
Establishing a relationship with the owners of the buy-to-let property could help with the deal. Having met you, the vendors hopefully think that you are a good trustworthy person to deal with. You should then be half way there in terms of convincing them to sell to you. I’ve recently viewed a property which the vendor conducted the viewing which was great because I could tease some important details out from her about her aspirations for the sale. It appeared that she was looking for a house but wanted to sell first to put herself in a good position when it came to a purchase. I immediately offered her the opportunity to rent back the flat whilst she searched for a house of her own. This aspect of my offer immediately made it more attractive to her over an owner occupier or other buy-to-let investor. A landlord needs to be responsive to finding the best buy-to-let property deals and opportunities.
8. Auctions can offer opportunities
Property auctions can provide a landlord an opportunity to bag a bargain. Essentially, a landlord will need to be able to complete the purchase within 4 weeks from the gavel going down. This makes the use of a traditional mortgage problematic as for many purchases it will take the purchase outside this time frame. A landlord really needs cash or bridging finance to allow them to complete a purchase at auction.
The types of property that typically turn up at auction are generally: ‘wreckers’, repossessions or property that no one wants. The proverbial bottom of the property pile. Therefore, a landlord needs to balance the attractions of a low price, against the potential resale value when it comes to realising their investment. You should also be aware that the so called ‘guide price’ that auctioneers often attach to an auction property are often priced deliberately on the low side to draw buyers in. Don’t be surprised if the property achieves a much higher price, especially if half decent.
9. Conversion opportunities
During the property boom many properties in non residential use were snapped up by developers and investors who avidly went about their conversion projects. There are always many properties that come to the market unconverted and hang around unloved and unsold. Legislation brought in by the previous government allows landlord / developers to recover most of the vat paid on bringing the building up to a residential standard.
I’ve witnessed former pubs that have gone into the auction room to be sold at less than the value of the land and salvage if you knocked them down. Many of the least wanted buildings turn up at auctions or on specialist business agents like Christies.
The essential thing for any property investor is that they keep looking and looking hard for their buy-to-let property. Finding potential investment opportunities is the fun bit. The thrill of spotting that one in the million property that all the others have missed can’t be beaten. Property investment bargains are out there. However, sometimes when a property hasn’t sold; there is a reason; legal, ownership or otherwise. Don’t get disheartened. The path to finding your buy-to-let property bargain may sometimes be paved with disappointment, but it can also be paved with golden opportunities.
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