Understanding the Stages of Investing in Buy to Let

Advice from Mark Walton, managing director of Walton Robinson.

1. Research

You can never do enough research. Start with the locations you are thinking of buying property in and get to know them. Determine what you could afford in each area and the type of tenant that would be attracted to each property type. You can then work out the likely rental returns and occupancy levels for each.

Research the capital values in the area - is it a robust or fluctuating market? Robust capital values are safer and value can be added. Fluctuating capital values are more risky as value can be lost for long periods, but larger increases in value can be realised if a property is bought at the right time in the right area.

If you are planning to have a multiple occupation house (three or more unrelated tenants - e.g. a shared living arrangement for students, post graduates or professionals) you must research the strict HMO regulations.

2. Timing

You need to understand the cycle of your chosen target market. Student properties will run in a summer-to-summer cycle, as this is change over sits in line with term dates. In a university city the demand from post graduates and young professionals is channeled into the same cycle because of the demand created by students at specific times of the year.

If the area is not a university city or the prospective tenant is a family unit, the cycle is different. People tend to not want to move around summer or Christmas and Easter holiday seasons, creating a drip-feed of prospective tenants throughout the year.

Missing the cycle can have its uses. If you are in the position to do so, purchasing a property in November or December can be a good idea as low demand means savings can be made on capital value spend. It may be possible to secure a property at this time of year for tens of thousands of pounds below the asking price. If a reduction of £30,000 was negotiated, renting the property at a reduced rent of £10,000 as opposed to £12,000 until the next cycle would mean a net saving of £28,000 is realised.

3. Making it happen

The less exciting part of property investment is appointing the relevant professionals in order for all your paperwork to be in place ahead of a purchase. Quotes for finance, solicitors, and insurance can all vary dramatically in price and speed, which can make the difference in getting your chosen property, or not.

This is a stage that a professional buy-to-let agency can manage on your behalf. Agents should have well-developed contacts and relationships with companies over years in the industry that often provide much cheaper quotes, and advise in areas you may not be familiar with. At the very least seeking the free advice of a good letting agency is worthwhile as they often arrange insurance on behalf of their Management clients.

4. Preparing the property

Rearranging rooms in a property can help to balance an uneven property, and in some circumstances find a new room; turning a dining room into a bedroom instantly increases the value of your property.

In terms of decoration the most effective option is a light neutral colour. First impressions count, so always walk into rooms as if you were the tenant; is it full of natural light with a fresh look and feel?

Cheap furniture can be very appealing to keep cost down, however it can cost you more in the long run when they have to be regularly replaced.

There has been an interesting shift in standard features tenants expect in rented property; in the 80's people were impressed with a washer/dryer machine, the 90's it was a dish washer, now we find tenants expect both of these and it is a television that impresses. The home comforts are necessary for the landlord to invest in as they can be powerful persuasive tools - people can imagine themselves sat in the evening on the sofa watching their new flat screen TV.

Get someone to imagine your property as a home and you've obviously worked your investment perfectly.

If all this still sounds appealing, it is a great time to invest in buy-to-let so start your research now. 

Mark Walton is co founder and managing director at Walton Robinson, Newcastle upon Tyne estate agency. Mark can be contacted on 0191 243 1000 or mark@waltonrobinson.com.


Walton Robinson