Buy to let still has many advantages as a way to make money and invest for the future. But today, property investors need to be more considered about what type of property they buy. So if you want to buy more buy to let properties this year what sort of properties should you be considering?
Recent months have seen tenants appreciate the benefits of more space. That’s a reversal of the trend in recent times when compact easy/cheap to run properties tended to be favoured.
For the same reason properties with larger gardens – something that many tenants and landlords positively didn’t want because of the maintenance needed – may now be more sought after.
Family properties tend to be a more secure letting proposition right now. Families with children tend to put down roots and don’t want to move as often. They usually have more than one income to meet the rent. At the moment they look a more secure investment than properties aimed at professionals or even students.
Something more rural
Covid has encouraged an interest in moving from the cities to the country. More people are looking for more space not just in their home but around it. Plus more working from home has meant more people can consider living in more rural areas.
A plus for buy to let investors is that rental accommodation in many rural areas is scarce, in high demand and commands good yields.
This article considers Moving To The Country, Good Idea Or Not?
It’s really difficult to forecast the future of the market right now. So it might be sensible to invest in properties which are flexible. And which can be adapted to suit future patterns of demand.
For example, a three bed house with equally sized bedrooms could be let to a family. Or sharers. Or could even be a serviced property depending where demand grows in future.
A property in a rural area could be short term or holiday let as well as a long term let, depending on the strongest demand for it.
Something to which you can add value
Rising prices means yields are tight in many places. One way to increase your yields is to buy a property in need of refurbishment before you let it out. With careful budgeting you could find that the yield on the purchase price plus refurbishment expenditure is several percentage points higher. That’s compared to the yield on a ready to rent property of the same value.
Another possibility to consider is Buy, Refurbish, Refinance, Rent or BRRR.
You could also consider something more upscale like a property with scope for extension. While extensions generally don’t raise yields they can add to capital value. They can be a useful way to raise the capital value of your investment. Especially in times when it might not be safe to rely on rising property prices alone.
A slow-moving trend of recent years has been accelerated by Covid. Right now, the supply of redundant retail space is rising sharply, while values are falling. At the same time as demand for residential and values is rising. The easing of planning rules also brings renewed potential to this kind of investment.
While retail to residential conversion has been around for a while recent events have tipped the balance much more in its favour.
Something lower priced
In general terms, lower priced areas have always been about investing for income rather than investing for growth. While the reverse has applied in higher priced areas. So, in times of fast rising prices, where investing for growth is a tricky proposition, lower priced properties that offer income rather than growth tend to look more appealing than ever before.
In any case, it’s generally always been the case the lower value buy to lets return a better yield than higher value buy to lets. For example, a £150,000 property could easily return double the yield of a £300,000 one in some cases.
Even today there are still many lower priced areas for investors to consider. These are likely to become even more sought after for buy to lets over the next few years.
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