With interest rates possibly staying at rock bottom levels until 2016, small investors could be tempted to withdraw savings from poorly paying banks or building society accounts to invest in bricks and mortar.
But property investment firm Assetz has drawn up a checklist for first-time investors, urging them to be highly selective where they buy: 1 Location, location, location – Find an attractive location with a sound employment market that’s not too reliant on manufacturing or the public sector. These areas could see five per cent or more price growth. Areas hit by high levels of unemployment will see low transaction levels next year and falls in value up to 10 per cent.
2 Know your tenant – Investors should have a particular tenant market in mind when buying a property. Professional couples, for example, usually require a parking space or proximity to good public transport with two bedrooms, high quality kitchen and bathroom and a sleek, modern finish. Local knowledge or specialist agents may help you to find a bargain.
3 Decide whether to be an investor or landlord, depending on how much time you can spare on your investment – If you work full-time, get a letting agency to manage it on your behalf. Many first-time investors are surprised by the amount of work involved with directly managing a buy-to-let, so delegating day-to-day tasks in return for seven to 10 per cent of the rent is well worthwhile for most people.
4 Be sure the property you choose is a sound investment – Don’t let your heart rule your head when it comes to choosing an investment property. Unless you are buying a personal holiday home which you want to rent out for just a few weeks a year, base your choice on what the rental market requires.
5 Know the local rental market – Investors should always investigate how well similar properties have let over the previous year in their chosen location. Ask local agents what rental incomes are being achieved and which properties are most in demand. It isn’t just rental income that is important but overall volume of demand, as this can reduce voids between tenants.
Stuart Law, chief executive of Assetz, says: “High levels of tenant demand will continue to underpin the buy-to-let market next year, with numbers of investors and landlords continuing to swell as people seek to generate a decent income from their cash.”