What makes a good buy-to-let property? We reveal all...

What should you really look for in a property deal? We go through the fundamentals...

Buying a home with the intention of letting it out is a completely different beast to buying one to live in. It will require careful consideration to ensure you get the best rental income and a profitable return.

If you choose well, you’re going to benefit from short and long-term gain. In the short term, you’ll be receiving rental income each month from your tenant. Once you’ve covered your outgoings, the rest is yours to invest, save or spend. And in the long term, you’ll benefit from the capital gain that your property generates.

When assessing your property investment options, you’ll want to look out for some key things. We’re here to tell you specifically what to look for and why it’s so important.

Return on the investment

The rental yield is a measure of the return you could make from a buy-to-let by comparing the rental income against the value of the property. As a rough yardstick, if the property is likely to generate a yield of 5% or higher, it’s a good bet for buy-to-let. Of course, it's worth noting that the rental yield differs from region to region - you're best speaking to a local agent to get a good idea of yields in your area. Demand for rental property is an important factor in determining possible rental income. If there’s not a high rental demand in a particular area, you may want to consider if you should invest there. An easy way to find this information out would be to speak to your local letting agents. They’ll have a good idea of what the rental demand is like in the area you’re looking in. Rental demand can significantly differ from neighbourhood to neighbourhood, even from street to street. But getting in touch with the local experts would be the first obvious tip.

If you’d like to check the likely rental income on a property you’re interested in, get a free, no obligation valuation now.

Check how long the properties take to rent out

A quick scour through Rightmove and you’ll be able to see how long properties took to let out in the location you’re interested in. Again, your local agent will probably have the best idea of high demand areas and neighbourhoods. If the demand is high, properties will get snapped up quickly.

What is the capital appreciation in the area?

If you’re investing for the long term then this one should be a given. Remember, our advice to budding investors is to look at your buy-to-let projects as great long term ventures. You may make a good income in the short term and capital growth also means the property you’ve bought may make you a nice bit of profit in the long term too. You need to ensure you buy a property in an area that will see some good house price growth – an agent will be able to help show you what this has been historically, although of course the past isn’t a definitive guide to the future.

Buy close to where you live

Or at least buy in an area you know something about. Find out if there are any regeneration projects going on or are planned for the future. Is a new transport network being built? Is the location having a large sum of money invested into it? Also, think about the demographic you’re targeting – if they're commuters, does the area have good transport links? If you’re targeting students, can you buy a property near the bars and campus? These are the sorts of questions you need to ask yourself. And if you’re unsure of the answers, speak to an agent. 

Think about the job market

The more jobs there are, the greater the potential rental income. Look to see if there are many major employers coming to the area and invest in property ahead of potential price increases.

Consider crime rates and lifestyle

Well, it goes without saying that both factors affect the desirability of a neighbourhood. The lower the crime, the better the lifestyle on offer in a location. Can people enjoy a good quality of life in your area of choice? People are unlikely to want a two hour commute to work or to live in an area where half of the shops are boarded up. Factor this into your research.

Why is this all so important?

We’re not saying you MUST tick all of these boxes, but it’s a great place to start and to get you thinking about the sorts of questions that are key to making smart investment decisions.

So, now you’re fully equipped with some really important property fundamentals. Next you should find out whether the rental income you’re hoping to generate is actually realistic. Hit the button below...