If you’re looking to buy property to let then investing in an apartment or flat rather than a house can often be a good choice for the new or existing landlord. Here are Insider’s property investor tips to help you find and buy the best buy to let apartment:
Who will you let it to? This is the very first thing to consider. You can’t find the perfect apartment to invest in until you know who your target letting market is. For example, do you intend to rent into the professional market, students …. or someone else?
When you’re looking for property to buy make sure the properties you shortlist will appeal to that type of tenant.
Is the location right for your market? Students look, first and foremost, for locations that are within walking distance of college and, secondly, locations that have good public transport links there. Professionals look for locations that are easily commutable for work and also those that have good road/rail connections.
What amenities are there nearby? Apartments which have amenities such as convenience stores, bars and restaurants nearby are usually easier to let. Localities that have no local amenities can be more difficult to let.
How many bedrooms? One bedroom apartments can only be let to singles or couples. Two bed apartments can be let to singles, couples and sharers. A property which can be let to sharers and which has two double bedrooms (not just one) can command a higher rent.
In many cases, studios and three bed+ apartments have a much more limited demand than one and two beds.
Should you buy off plan? Buying an apartment that hasn’t been built yet is often a way to invest at a very attractive price. However, the downside is that there’s no proven letting demand for a property that doesn’t exist yet – and the projected rent may not reflect the actual rent which can be charged when the apartment is ready to let. (If you are offered a guaranteed rental period bear in mind that the guaranteed rent may well not be the same as the actual rent which can be earned.)
Is there actually a demand for that location/that type of apartment? Within any given city certain locations (and even certain buildings) plus particular types of apartment will be in high demand – while others will be in low demand, or even in no demand.
Look at if/how many vacant apartments the block already has, if any. Ask local letting agents and experts for guidance on this.
Important – new developments tend to be in high demand initially as they are heavily promoted by their developers. This tends to tail off in future years.
How will you let it? Are you planning to rent to a long term tenant, a short term tenant, a corporate tenant or, perhaps, put your apartment into the growing daily rental market using a site like Booking or AirBNB?
In general terms shorter term lettings return a higher yield, but more management time and expense is involved.
Consider whether you will be letting the apartment yourself or will need to find a management company and/or letting agent.
Should your apartment be furnished, unfurnished or partly furnished? To a greater extent this is linked to the type of tenant and letting you have in mind and the rent you can charge.
Remember that if you opt for partly or fully furnished the standard of furnishing should generally be in keeping with the standard of the apartment itself, ie. higher end apartments should have higher end furnishings.
Is the block well maintained? Does it look appealing? Apartments in blocks which have poorly maintained or worse still dirty grounds and communal areas can be difficult to let and, where they do let, probably won’t attract the best prospective tenants.
What service charges are payable? As well as Council Tax and ground rent there will almost always be a service charge to pay for maintenance of the communal areas and grounds.
Be aware that blocks with higher service charges are very often maintained to a higher standard but this isn’t always the case. An apartment in a well presented, high service charge block may even be harder to rent and even reduce the rent you can charge not add to it. High service charges can reduce your yields – since you’ll have to cover them yourself during void periods – and even make your investment harder to resell.
Lastly, as with any kind of property make sure you have an exit strategy before buying an apartment. You might find this article useful: Buy To Let Investment: What’s Your Exit Strategy.
Also, here are some general pitfalls to avoid when buying property to let: 12 buy to let property fails to avoid.