How much deposit will I need?
Buy-to-let lenders typically require larger deposits than those of regular residential mortgages, and for the best buy-to-let mortgage rates you will typically need a 25% deposit (although there are lenders that offer buy-to-let mortgages with a 20%, or even 15%, deposit). Some new-build properties, especially city centre flats, currently require a deposit as high as 30% as they are considered a higher risk following the credit crunch and there is an oversupply of flats in some areas. The higher your deposit, the better rate you will be able to obtain and it is important to shop around to find the best deal.
What is a good type of property to buy?
Choosing the right type of property to invest in is a balancing act as each type has advantages and disadvantages to it; the right choice for you will depend as much on your experience and preferred level of involvement as what you are looking for from the investment (rental return or capital appreciation). Smaller units will typically generate a higher yield but many areas are finding the market saturated in flats and apartments and the tenant turn-around is usually more frequent. Two bedroom terraced houses are very popular with tenants in Crewe, Newcastle-Under-Lyme and Stoke-on-Trent and they tend to provide consistent returns and stable tenants. However, some landlords opt for modern new-build properties which require minimal maintenance work and upkeep. Whatever type of property you opt for, ensure that it is in a good location and that the rent level which you can realistically achieve will cover your costs.
Should I buy at auction?
If you decide to buy an investment property at auction you must have your finances in place prior to bidding as you will have to pay a deposit of 10% of the purchase price on the same day if you are successful and the remaining balance usually within 28 days. Due to the short timescale involved, most auction purchases are cash buys, with landlords securing finance on the property at a later date if required. If you haven’t bought at auction before beware of what seem like bargain properties: unmortgageable and problematic properties are often sold here so make sure you do your homework before bidding and appoint a solicitor to thoroughly check the legal pack prior to auction so that you know exactly what you are buying. Stick to your limit and avoid paying over the odds; never forget that your winning bid is more than everyone else in the room considers the property to be worth. Finally, be aware of any buyer’s premiums which are charged by the auctioneer and remember that when the hammer falls you have entered into a legally binding contract.
What yield should I be aiming for?
The yield is the annual rate of return on an investment expressed as a percentage, and it helps you to determine if your investment is a viable proposition. The yield to aim for very much depends on the individual investment, the investor themselves, their requirements and attitude to risk, as well as other factors such as the type of tenant it will attract, the condition of the property and the potential for capital uplift.
If you are prepared to accept a higher level of risk, work and associated costs, you can achieve a yield in excess of 20% by investing in HMOs and student accommodation. Alternatively, a detached house in a popular area will require minimal work and will attract high quality tenants who often seek long-term tenancies but achieve a relatively low yield of 3-4%. The middle ground favoured by many investors is 2/3 bedroom terraced houses in Crewe which typically achieve yields of 7-8%. In general, to obtain a higher yield you should look for investment properties which require renovation work and can be purchased at a low, or below, market value. You can then add value through updating the property and obtain premium rent levels which will deliver a healthy yield.
How do I find below market value properties?
Purchasing a property at below-market value is every investor’s dream but, unsurprisingly, they are very difficult to come across and usually depend on having the right contacts. Estate agents usually have a group of preferred investors who they will call as soon as they take on a bargain property so the best buys can be snapped up before they hit the market. Entry to this group of investors is not guaranteed and is dependent on building up close relationships with the agent and proving that you are a reliable investor who can act quickly and has the finances to proceed. Another way to access below-market value properties is to build up a network of contacts in the local area: tradesmen, other investors and local businesses can provide early details of upcoming sales and allow you to get in first. If you can’t forge the necessary links to gain access to these properties speak to Jonathan as his contacts may be able to help.
What standard of finish do I need on my property?
The standard of finish expected by tenants in rental properties has risen over the last five years, in part due to the influx of homeowners renting out their family home during the recession. To attract the best tenants you need to ensure your property has a top-quality finish with modern kitchens and bathrooms, gas central heating and Upvc windows now considered the norm. Speak to us if you are unsure of what needs doing at your property and we’ll happily take a look.
Is Crewe a good area to invest in?
Crewe has an abundance of established rental properties and a large market of potential tenants, making it an excellent area to invest in provided that you do your homework first. It benefits from relatively low house prices and is probably one of the cheapest areas in Cheshire to invest in. The presence of Bentley Motors and the nearby Leighton Hospital, combined with Crewe’s large university campus and numerous business parks ensures there is a constant demand for rental property. There is a wide variety of properties to choose from too, with the traditional two and three bedroom terraces now joined by an influx of new-build apartments and housing developments. The large choice of properties means it is essential that you think carefully about the area you want to invest in and that you are happy with the rent level you can realistically achieve and the type of tenant you will attract there. Speak to us to discuss your options and the type of property which will be best for you.
Should I buy a property that needs work?
Buying a property in need of renovation can add significant value but you need to ensure that you realistically assess the costs involved in doing the work to make sure the end profit really is there. Discovering that the property is damp or subsiding after you’ve bought it will eat into your profit and many landlords underestimate the costs of labour, materials and all of those little extras which are often forgotten at the start. This is Jonathan’s area of expertise so get him to have a look at any property you’re interested in buying or before you start work. His renovation company offer competitive quotes and can complete and manage the whole job with minimal involvement from you.