7 things to know before buying a buy-to-let investment
Buying a buy-to-let property requires careful planning and research to ensure the investment aligns with your financial goals. From choosing the right location and understanding rental demand to calculating costs and assessing the property itself, there are several important factors to consider before committing. This guide covers seven key things investors should know, including how to build an investment strategy, research the market, access off-market opportunities, assess EPC ratings and think about the long-term performance of a property. Taking the time to understand each of these areas can help investors make more informed decisions and build a stronger property portfolio.
Insight highlights
Define your investment goals and build a strategy around them
Research location, rental demand and the numbers before buying
Consider long-term performance, EPC ratings and off-market opportunities
7 things to know before buying a buy-to-let investment
Before purchasing an investment property, it's important to know and understand what you are buying. There are a few factors to consider, and it's crucial to do some additional research to achieve the best possible outcome.
To make sure you are well informed, we have put together a list of seven things you should know before buying a buy-to-let investment.
Know your investment goals
When taking your first steps into property investment, you need a strategy. You should start by assessing the basics.
How much capital do you have? What are your goals for investing? And how hands-on do you want to be? What is it you want out of your investment? Are you looking for steady rental income, or are you after long-term capital growth? Maybe it's a balance of both.
By understanding what you want, you can then tailor your strategy towards your investment goal.
Choosing the right location
Although this may seem quite straightforward, it is something that is often overlooked. Picking the right location for your property investment can be a make-or-break factor.
When looking at BTL opportunities, do your own additional research on the area and consider some of the following aspects. What's the local employment rate, any future infrastructure plans, and regeneration projects nearby?
See what the rental demand is like and whether there is a supply-and-demand imbalance that will ensure limited to no void periods.
Understanding the numbers
If it is your first time purchasing a buy-to-let investment property, you may not be familiar with the terminology and some of the fees involved.
Understanding what's coming ahead can save you from being disappointed, but more importantly, it gives you a more realistic idea of what your returns will look like and if it's worth it.
It's important to do your own research here, but some of the things you need to factor in are as follows: Mortgage costs, rental income, service charges, management fees, maintenance, insurance, tax, and potential void periods.
Research the rental market
Knowing the market you are buying in is very important so that you understand where and what type of properties you should be looking for.
Researching rents for comparables is helpful to recognise what is achievable in the market you are looking at. The tenant demographic is also important to know: is it a professional area, students, or retired tenants? etc.
Researching the market helps you gain an understanding of what you are getting into and helps you know where your property sits within the market.
Look beyond what's on the open market
Some of the best property investment opportunities are not listed on the open market. However, that does not mean you can not access them. Specialist agencies are the best way to source off-market properties.
If they are off-market, it typically means the property is off-plan, so you are buying it before it has been built at a discounted price. Specialised investment consultancies such as The Prestbury Advisory are the types of places offering the best BTL property opportunities in the UK’s leading markets.
Screen the property itself
Once you have been through the refinement process and begin delving into the properties themselves, make sure you are in the know.
What condition is the property in? If you are buying off-plan, this is not a problem, as you know you are buying something brand new. What will the running costs be like?
Check the EPC rating to see if it is sustainable, as these factors can affect long-term performance. Future regulatory changes to EPC could mean all properties have to reach a minimum of C by 2030, so properties below this will need servicing to reach the threshold.
Think about the long term
A buy-to-let property should fit into or be an addition to a much wider investment strategy. Investing is a long game, and likewise with property investment, you should consider how the property could perform over 5-10+ years, not just what the return looks like today.
If you are thinking about investing in property, contact The Prestbury Advisory today.
With 80 years of combined experience, The Prestbury Advisory provides a specialist service to selected clients, providing them with the inside track on the UK’s most exclusive property investments.
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