Why rental property could be the right investment for you
Whether you’re considering a purposeful investment in buy-to-let property or could potentially be an “accidental” landlord through circumstance, the private rented sector could be the right investment for you. Returns can be favourable in comparison with other investments, especially as you get to benefit from the increased capital growth over the long term. However, it’s also not right for everyone and several factors should be taken into account to ensure the success of a letting property in the private rented sector.
Such an investment could be right for you if:
· You’re looking for a tangible investment that you can be involved in
The choices you make – from choosing the location, property type and tenant and the level of investment you make in the property – can all impact the returns you receive. Even if you instruct a lettings agent to manage the property for you, you will still be involved in decisions to do with the let.
· You’re willing to tie your investment up for the long-term
Tenants are usually at their best when they feel secure. They’re more likely to look after the property and contribute to the maintenance when they feel that it is their home. Although it’s wise to start a tenancy with a shorter initial tenancy agreement, and although most tenancies are ended by the tenants due to a change of circumstance, one of the most common questions we get from applicants is “Is it a long-term let?” Tenants want to feel secure in their home, even when renting.
Besides this, although property prices can fluctuate in the short-term, over the long-term sale prices increase. The longer your investment, the more you are likely to benefit from this.
· You understand and accept the risks of letting property
Although worst-case scenarios are rare, the landlords who benefit the most are the ones who hope for the best but prepare for the worst and measures can be taken to ensure that worst-case scenarios are avoided. Referencing tenants prior to signing a tenancy agreement, taking out suitable insurance policies and dealing with minor repairs so that they don’t escalate to bigger problems can all help avoid the horror stories and give you peace of mind in your investment.
· You also understand and accept the responsibilities of being a landlord
Being a landlord comes with a raft of legislation and that legislation can be subject to change. Keeping a close eye on property news, being a member of the National Landlords Association or using a lettings agent who is qualified and actively engaged in keeping abreast of developments within the private rented sector gives you the best chance to pre-empt these changes without being hit with a compliance hoop to jump through at the last minute.
· You understand and accept that there are costs involved in owning and running a rental property and this will impact your return
These costs can include maintenance, insurances, tax, void periods and agency fees, as well as complying with safety checks and legislative compliance. Factoring these costs into your figures can help you decide as to the best investment for you, whilst having a contingency fund in place helps manage any unpredictable expenses, such as property repairs.
By taking all of this into consideration, however, there is still sound investment to be had in the private rented sector. Significantly, you get to benefit from a monthly rental income whilst the property over the long-term increases in value. In this way, investment in the private rented sector can offer a competitive return of investment in comparison with other options, whilst also giving you a strong element of control over how you choose to let the property.
Plus, if the property had previously been a family home or you want to move into it yourself in time to come, letting it to tenants allows you retain ownership for your benefit in the future.
So, what are the current rental yields in West Norfolk?
Rental yield is calculated as taking the annual rental income divided by the value of property multiplied by 100. With property prices lower in West Norfolk than in many parts of the country, the potential to achieve a good rental yield in comparison with other investment options falls in the favour of landlords. For example, a two-bedroom house close to the Queen Elizabeth Hospital on the market for £123,000 could achieve a rental value of £700 PCM, resulting in a yield of 6.8%, whilst a 2-bedroom bungalow in a village location, on the market for £200,000, achieving a monthly rent of £800 PCM calculates at a yield of 4.8%.
For specific advice on Lettings in your area, talk to a lettings agent with local knowledge and professional experience as they will be able to advise on how you can get the best return of investment taking the local market into account. At Brittons Estate Agents, our small team of lettings agents are all professionally qualified, with years of experience working in the private rented sector in the area and we can help guide you to achieve the best return for your property, whether as a buy-to-let investment or one that’s become available through family circumstance. Call us on 01553 692828 and let Brittons let for you.