How to buy a profitable investment property
From the moment you decide to invest in property in Southend-on-Sea, there is important research to be done before becoming a private landlord. Owning houses for rent in Southend and the surrounding areas is not always simple. There can be issues that will eliminate your returns. Martin Ransom, Office Manager at Southend Lettings agency Pace offers some ideas about how to begin you search.
1. The area
The quality of the area in which you buy can influence both the types of tenants you attract and how often you might end up with an empty property. For example, if you buy in an area near a university, the chances are high that potential tenants will predominantly be students. This means empty properties during the summer on a fairly regular basis.
Your future tenants may have or be planning to have children. If so, they will try to find a home near a good school. Always check the quality of the schools in your chosen area because this can affect the value of your investment. If a nearby school has a poor OFSTED rating or a bad reputation, prices will be reflected in your property’s rental value. Although you are also probably more concerned about regular rental payments at this stage, the overall value of your property is a consideration if you eventually plan to sell to fund your retirement.
No one wants to live next door to a hot spot for criminal activity. Go to the police or the public library and research current crime statistics for various areas. Look for information about vandalism, serious and petty crime and whether it is on the increase.
Check the your chosen areas for retail parks, gyms, cinema and restaurant complexes, health centres, public transport links and all of the requirements regularly requested by tenants. Towns and cities, and sometimes even particular areas have websites and often promotional literature that will give you an idea of where the best mix of public amenities and private property can be found.
5. Planning permission and future developments
Local authority planning departments will hold information on any intended building work for the area. If there are new housing estates planned, business or retail parks, it is probably a growth area. However, new build housing could also provide competition for your potential tenants, so be aware of that possibility.
6. Amount of ‘For Sale’ boards
If there are plenty of properties for sale in a particular area, this could either be a sign of a normal seasonal property cycle or maybe an area that is in decline. Make sure you find out which it is before you buy. Also look at how many properties are ‘To let’ in the area. High vacancy rates can force landlords to lower rents in order to snap up tenants; conversely, the opposite can also apply, where few available rental properties can allow landlords to charge a premium price.
Rent is the bread and butter for your property investment, so you need to know the average rental fees being charged in the area. Speak with any of the property advisors at Pace, who will know the local market and can guide you on sensible rental values. If asking for the average amount is not enough to cover your mortgage payment and other expenses, you need to continue your search. Be sure to research the area well enough to gauge what might happen in the next five years. If you can afford the area now, but major improvements are in the pipeline, then what could be affordable now may considerably increase in price later.
8. Natural Disasters
The weather is hitting the headlines with increasing regularity and insurance is another essential expense you will have to subtract from your returns. If a property is in a flood plain additional insurance can be expensive and may diminish your rental income. Do you really want the hassle of flood damage and insurers to deal with?
9. Rent Insurance
If you are at risk of not being able to pay the mortgage on your property if the rent doesn’t come in then seriously consider taking out rent insurance to cover the rent if the tenant does not pay it. See further details here on our website: landlord’s insurance.
The Bottom Line
Every county has desirable towns, every town has desirable areas and every area has desirable properties, but it takes a lot of groundwork and research to find all three. When you do find your ideal investment property, keep your expectations realistic. And, make sure your finances are in a healthy state. You may have to wait for the property to generate rent for a couple of months. Don’t forget to factor in times when you will have no rent coming in at the change of tenant or due to a bad tenant. It is also worth budgeting for a reputable local lettings agency in Southend to manage your property for you. This allows you to sit back and enjoy your returns without the hassle that comes with looking after tenants.