Choosing the right rental property to invest in is key to any successful property investment. In order to invest effectively, it’s imperative to consider who your ideal tenant is and invest in a property that will attract that tenant.
And as with any financial investment, conducting vigilant due diligence is essential before investing in any rental property. Do necessary research on the property, location, investment strategy and market trends to help you decide on the right property.
Here’s our guide for choosing a rental property to invest in.
Location, location, location
Location is a massive factor impacting property and rental prices, and it will always be a key factor to a successful property investment. It can be helpful to invest where you know, but if not, take the time to become an expert in the area you’re looking to purchase a rental property in.
Finding a property in an up and coming area can be particularly lucrative in the long-term, especially with the uncertainty still surrounding Brexit and the recent outbreak of the coronavirus. During uncertain times, focusing on areas slated for regeneration and growth will likely help you make better yields rather than just focusing on capital appreciation. Are more businesses and people moving there? Are there more investment and development on its way?
It’s also important to look into tenant demand and what the average rent is. Areas where demand is outstripping supply can allow you to make higher returns and have fewer void periods. Having knowledge of the local market can be helpful in knowing not only what city or town to invest in but what part of town and can even help you pick specific streets.
Before investing in a property, it’s important to increase your knowledge of the local area. It can be helpful researching the following:
- Median income
- Job market
- Unemployment rate
- Crime statistics
- Green space
- Leisure facilities and amenities
- Upcoming development
There are a range of different property investment strategies to consider when choosing a rental property. And it’s essential to decide on an exit strategy before purchasing a rental property. Do you want to invest in an HMO, single-let or serviced accommodation? This will impact what kind of property will work best for your chosen strategy.
Type of building
Choosing a certain type of rental property will largely influence the kind of tenant you’ll get. It’s helpful to weigh up the benefits of new or older builds. Low-maintenance properties are ideal for any rental property, and more modern houses can fit the bill. However, many tenants like period features in a home.
Keep in mind that some property types can be difficult to get a mortgage on. This can include new developments, flats located above commercial space and former council houses.
It’s important to also think about leasehold or freehold tenures. With leasehold properties, be aware of what the added charges amount to and what services are included before buying the property, in addition to how long is left on the lease. With freehold properties, the maintenance of the building comes down to the owner and needs to be budgeted for.
Research property market trends
Looking at property market trends can help you figure out what people prioritise in a property, whether a rental or home. Certain interior layouts work better for rental properties. Know what renters want, and the type of tenant you’re aiming to attract matters.
Adding attractive amenities or features that modern tenants are prioritising can boost the appeal and rentability of your property. If you plan to do work on a property, it’s important to research the local area and what will add value to the property.
Use PropertyMenu to help you do the maths
As with any property investment, it’s vital to do background research and perform your own due diligence. PropertyMenu can help you compare and benchmark property investment opportunities, in order to find the best rental property for your investment strategy.
Property investment deals are often confusing and lack information and transparency, so PropertyMenu has created a deal calculator to help provide property investors with full clarity on investment deals.
We use a transparent and consistent methodology for predicting ROI, and as the operating costs of a rental property can make or break a property investment deal, the deal calculator also estimates the relevant operating costs for rental properties. This includes costs such as insurance, utility costs, high speed broadband, TV license, management fee and maintenance and cleaning costs.
PropertyMenu’s deal calculator can help investors assess the value of each deal and estimate the operating costs involved in a rental property, allowing investors to make more informed decisions. Check out our deal calculator if there’s a rental property you’d like to assess.