How best to invest for buy-to-let yields?
- 9th November 2011
- Property Tips
With capital growth prospects uncertain even in London, investing for yields is more important than ever.
Buy-to-let investors might miss the pre credit crunch days of easy capital returns on their portfolios.
Even London, where house prices have performed best, is unlikely to see the kinds of double digit percentage increases to capital values that were commonplace just five years ago.
Investors now need to look to managing their portfolios to generate yields rather than relying on sales.
Investing for yield is a different kettle of fish, so what can investors look out for?
The Basics – easy to let
Stephen Ludlow, Chairman of ludlowthompson, says: “Investing for yield means choosing a property which will be much in demand. That reduces the void periods that can undermine rental return and reduce yields. It is likely that such properties will have a queue of tenants offering a rental. In such cases we are seeing tenants preparing CVs to impress landlords that they are the right tenant, aka a reliable tenant who pays the rent on time."
Factors that make a property easy to let include:
- Proximity to a big employer, such as a hospital, or area with a lot of employers, like the City.
- Whether the property is appropriate for young professionals, with large preferably evenly sized bedrooms and at least two toilets or bathrooms.
- The property is well connected, by tube, train, bus or bike.
Now the hard part…
Says Stephen Ludlow, “To achieve really high yields investors and their professional advisers need to find properties that will rent well but which can be bought cheaply.”
- Popular properties to look out for include ex-local authority flats and flats above shops.
- They rent well and they are also less popular among owner occupiers, which means they can sometimes be bought cheaply.
- Buying at auction can be a good way to find a high yielding property, but there are risks too.
Investing for yield means choosing a property that will be very easy to let.
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