Location, location, location. It’s a tired cliche, but it’s true; if you’re looking to build a profitable buy-to-let portfolio, geographic location plays a huge role in the kinds of rental income you can expect to earn. We’ve collected a few tips on how to investigate the rental yields of different areas, and how to value a lettings business.
Online calculators are a good place to start when researching the rental value of a particular area
For example, OpenRent’s calculator tool enables you to get an estimated rental figure simply by inputting your postcode, property type, and number of bedrooms and bathrooms. L&C Mortgages offers its own similar calculator tool.
However, calculators can only provide a limited projection of rental prices. Keep in mind that other factors – including the condition of your desired property and the current ratio of supply and demand – can vastly influence how much rent you’ll be able to charge.
Platforms like Rightmove and Zoopla aren’t just useful for finding buy-to-lets available to purchase. They can also be a valuable research tool for optimizing your investment strategy.
Start by running a search for your particular desired area. From there, you can use filters to narrow down the listings and see properties that are more similar to the types of properties you’re looking to invest in.
This will help you gather a general idea of how much other landlords are asking for; but what about how much tenants will actually pay?
Look for a ‘let’ or ‘let agreed’ tickbox. This will include recent properties that have been successfully rented out (or soon to be successfully rented out) in your results, which is great for getting a more realistic view of how much rent you can actually charge.
It’s also handy for assessing the demand in a given area by comparing the ratio of open listings to ‘let agreed’ listings.
If there are lots of the former and not many of the latter, you might struggle to find tenants without lowering your price; especially if the available properties have been on the site for a long time.
(Keep in mind, however, that property portals tend to only keep ‘let agreed’ listings on their sites for a limited time; so you’ll only be able to see the most recently let properties.)
Ultimately, finding the right location simply comes down to carefully researching the market at both the micro and macro level; comparing property prices in your chosen area with the rental yields you’ll need to afford the mortgage payments and maintenance costs while also turning a profit; and deciding on a rental figure that offers the right ratio of risk-to-reward for your investment strategy.
Need a hand with your property investment numbers? With over 30 years of tax and accounting expertise, GNS Associates are specialists in helping both new and established landlords get to grips with their finances.