In the know: buy-to-let investing

I’d love to start investing in property but I want to make sure I buy something that is likely to give me a good return. Do you have any tips for spotting a property that will be an attractive prospect to renters?

KFH group lettings director Carol Pawsey says:
As is usually the case with property, your watchword should be location. Pick the wrong area for your investment and the chances are you simply won’t get much interest from prospective tenants. Difficulty finding tenants risks void periods and loss of income, so it’s really important to suss out where there is a strong demand for rented property. Once you’ve decided on a popular locality, you can research the sort of properties in your budget which will command the best rents.

Remember that where you’d like to live and the sort of property you’d choose personally are not your priority and you need to make your decisions as dispassionately as you can.

RELIABLE RENTAL MARKETS

Property agents can be a great source of local knowledge so use them to your best advantage. For instance, in Kingston upon Thames, there’s a high population of students, and from June to October each year KFH is inundated with enquiries about property to let. Students often have generous budgets and, with parents acting as guarantors, they can make reliable tenants. KFH also sees high demand from the London Business School in St John’s Wood, with overseas students particularly willing to pay premium rents.

For the student market a large house with several bedrooms is often the way forward and can offer a good yield, typically around nine to 10 per cent. Other markets to consider include families and young professionals. Because of its easy commute into Canary Wharf, Surrey Quays is considered a good area for investment. Here, you could look for a flat with two double bedrooms, allowing two executives to share. Transport links are important, and these kinds of renters tend to expect things like a power shower and neutral decor. A first floor flat is ideal as this provides security without a garden to worry about. Family homes in the catchment area for popular schools are also constantly in demand.

LOOKING AHEAD

Choosing a local agent, one who understands the ins and outs of the property market in the area and is already dealing with rentals there, will always pay off. Whoever you choose, make sure your agent is a member of the Association of Residential Letting Agents (ARLA), as this ensures the agent is working to strict codes of practice in both the landlords’ and tenants’ best interests – and so increasing your chances of attracting high-end tenants.

As regards finance, the buy-to-let mortgage market is fairly stable: compared with five or 10 years ago, interest rates are more competitive but otherwise not much has changed. The good news is that at the end of 2011 there were only two or three buy-to-let lenders, whereas there are currently six on the market, with more to come.

One final word: always take the medium- to long-term view when investing, as the costs of selling will eat into any capital uplifts.

A minimum term of five to 10 years is a good rule of thumb.
Contact: cpawsey@kfh.co.uk

Words: Ben West; Illustration: Victoria Semykina/Furrary.com

Source: KFH 'Completely London' magazine (www.kfh.co.uk)