Questions To Ask When Buying An Investment Property
Whether you’re looking to purchase your first ever investment property or your twentieth, it’s essential to understand what the process involves. After all, investors want to put their capital into an asset that will reward them not just in the immediate vicinity but in the long haul too.
The best way to help ensure this will be the case is to explore all of the information available. In today’s post, we’ll be sharing some of the top questions to ask when buying an investment property to start the conversation for you.
Top tip: We hold monthly investor Q&A sessions over on our Facebook page with our CEO and founder Stuart Williams. If you don’t see your question answered below, why not send us a message for our next stream?
What type of investment property is right for me?
Bricks and mortar can transform into many types of buildings. There’s the traditional buy-to-let property which may be a house or apartment, along with student lets, commercial buildings and even hotel rooms.
While we’d always recommend seeking independent advice, we’d certainly suggest taking the time to look at the required level of capital involvement, along with the expected yields each investment type can bring. In addition, each property type may have different regulations or restrictions, which may make one type more suitable than another.
As an example, with student lets, the property will be let to young adults that may be moving out of home for the first time. The property will also need to be close to campus buildings to attract the best yields, and investors should calculate void periods during summer months into their calculations.
Our Natex Student Residences in Liverpool is an excellent example of a well positioned student let that has been completed to a high standard, and such properties are certainly more in favour these days than more basic offerings that were once synonymous with the student market. So, make sure you also research what your tenants will want from the property, to ensure your investment will be able to provide this.
Also to caveat this point, don’t rule out one type of investment until you’ve fully explored what the market has to offer, as there may have been changes that have made that particular market more accessible in recent times, which could make for a more attractive investment.
What does the location have to offer me as an investor?
Location holds such high importance where property is concerned, the very word was repeated three times when it was made into a TV show.
The first aspect of the location is the town or city the property is located in. A great point to note here is that the reality of what a location has to offer may be different than its previous reputation, especially if the city has received significant investment in recent times.
A notable example of this is Hull, which was made city of culture in 2017, and is fast becoming the hub for offshore energy production in the UK, bringing £1bn worth of investment with it. The thriving economy of Hull is vastly different from its deprived post-industrial reputation of previous years, and the high rental yields that can now be achieved in the city is testament to this.
So that you don’t miss out on other up and coming locations, we recommend keeping up with our investment hotspots guide, which we produce every year for our investors.
Narrowing down the location down to its postcode, other aspects to consider include the neighbourhood in terms of appeal and general property prices, along with its connectivity and amenities. Ultimately, the question is would people want to live in the area, based on what it provides? By ‘people’ think in terms of your intended tenant i.e young professionals, students, families etc, depending on the type of property and its location. If there’s a mismatch at this stage, it will certainly impact your potential return.
Is the property leasehold or freehold?
Those who are new to property investing may be making the decision between leasehold and freehold for the first time.
As a quick overview, leasehold means you own the land for a set period of time, and when the lease runs out, it is automatically transferred to the party which owns the freehold. Technically, this means you could lose the land if the lease runs out, and it can be a complex matter to sort out.
Freehold means you own both the property and the land it sits on, which also makes you responsible for all costs associated such as repairs and general maintenance.
Typically, freehold is the preferred option though you may need to seek independent advice to fully understand the conditions attached with either option.
What is the yield potential?
As a property investor, the two main ways you can earn income from property is through letting it out and eventually selling it for a profit.
The rental yield is naturally where investors focus, especially if the figure is to not only cover the mortgage but generate a monthly profit. The average rental yield in the UK is 3.63%, though higher yields are attainable by making smart investment decisions.
As an example, our Ancoats Gardens investment opportunity in Manchester has an expected yield of 7%, and our Sheffield City Apartments have a projected rental increase of 17% by 2025, which will ultimately be reflected within the yield.
How much work am I willing to put in?
Property may be an investment to you, but it will also be the place where your tenants call home, making you responsible for the upkeep and management of the property.
The good news here is that it is possible to control your level of input either by deciding to manage the property yourself or by hiring a letting agency who will take care of the work including marketing the property on your behalf.
The condition of the property may also need to be brought up to standard to ensure it’s fit to let in the first place or to increase the rental potential. The cost of the work may impact your profit.
All of our investment opportunities here at Thirlmere Deacon are fully completed to a high specification requiring no investor input, though if going it alone it will be your responsibility to complete any outstanding works.
To sum up
Asking questions is what sets an uninformed investment apart from an informed one. The above demonstrates what would be our top questions, but if you have any more of your own in relation to any of our investment properties, we’re here to help.
Thirlmere Deacon is a property investment company with offices in London and Dubai. We welcome potential investors to take a look at our current buy-to-let opportunities or scroll to the top of this page to view our investor resources.
If you’d like any further advice on anything we’ve mentioned above, or if you are considering investing in one of our opportunities, please drop us a message or call us on +44 (0) 203 9507939.