It may have become something of an overworked adage, but it really does seem that your choice of location for any buy to let property may make all the difference between having a business that is simply ticking over and one that is flourishing financially.
This latest confirmation of the importance of choosing very carefully the part of the country in which you buy to let comes from research conducted by the bankers HSBC and reported by the Telegraph.
The yardstick used by the researchers is one likely to be employed by any landlord wanting to invest in a successful business. The yield on the property is a simple calculation and one based on the annual rental income as a percentage of the purchase price of the dwelling or dwellings.
Rental income is determined less by the level fixed by the ambitious landlord, of course, and more by the prevailing market rents in the area in which the property is located.
Also affecting the effective yield is the amount that needs to be spent in running the property. This is likely to include expenditure on items such as repairs and maintenance, any lettings management fees and landlord insurance – the latter which you might want to discuss with us here at GSI Insurance, where we are experts in providing cover for let property.
Rental yield is not the only measure by which a landlord might want to measure success. Capital appreciation of the investment is also likely to be important. However, subject as it is to the vagaries of the house price index this may be more difficult to compute or to rely upon. Besides, investment in buy to let property is – for many landlords – likely to be a long term decision.
If property prices begin to stall once again, then it is rental yield which is likely to be the greater measure of the success of your buy to let investment.
Where to buy
If you are what is sometimes described as an “accidental” landlord – you may have inherited property which you subsequently decide to let – the location is naturally already determined.
If you are looking to start out on or looking to expand a more thoroughgoing and professional buy to let enterprise, however, you may want to take particular care in choosing the part of the country in which you decide to invest.
There are lots of stats online and you can also look at long term property forecasts, too, such as Knight Frank’s Property Forecast.