Finding Good Buy To Let Investments

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    Finding Good Buy To Let Investments

    Hi All,

    Firstly am a newbie to the forum and relatively new to property investing. though do own a couple of buy to lets, but bought just because heard property was a good investment (thankfully has worked out for me so far). However. I am now looking to get more serious and ensure what I do buy is researched properly and increases my probability of success.

    I have been reading this forum lately and think its a great place to learn and I'm hoping as I learn more hopefully I will gain the knowledge to be able to help others on here too and repay you all (fingers crossed)!

    I am currently researching property and have a few questions around finding good investments. Would be great to understand more from the fantastic expertise around here:

    1) When you are looking for a property for buy to let - what are the specific checks and criteria you use to decide what is a good investment and what isn't? ie what are the the specific things you look for in a property in terms of tick list to filter property?

    2) How do you find the areas that you target for finding property? Is there any specific tools you use? and how do you know it is a good areas vs a bad one?

    3) In terms of a rental yield - what is a good rental yield to look for and what is a bad one? How do you know you are not overpaying for the property also?

    I know these questions seem fairly basic - but would be massively helpful to understand how others do it?

    Thank you for your help in advance!!

    #2
    Have you ever bought a house? i.e one for you to live in?
    "I'm afraid I didn't do enough background checks apart from checking her identity on Facebook" - ANON

    What I say is based on my own experience and research - Please don't take as gospel without first checking the gospel yourself.

    Comment


      #3
      I have bought a house and a couple of buy to lets. Though I think what I was looking for then maybe wasn't the right criteria for success when looking really for a strong investment. Hence the reason I'm reassessing the key things to look for when looking for a property for buy to let. So would be great to understand how yourself and others assess property?

      Comment


        #4
        I chose to buy in the area where I grew up as it was supposed to have good yields. For which streets are good/bad I rely on local contacts.

        I started off looking at 2 bed terraced houses though I have got a couple of 3 bed semis. Since they have are working for me I have been sticking with them.

        I look for 8% gross yield or 10%+ ROI. I check the values of similar properties for sale or recently sold in the area.

        Comment


          #5
          I buy what I like and hope for the best. I like to buy things that might be a bit unique, different or even special. I also like new build deals when builders are crapping themselves at their year-end if they've not made their numbers (not so often these days). I have never once calculated a potential yield up front, nor am I that interested in doing it now. I always buy near where I live, nowhere further than 25 miles... it's too far to manage. I think Landlords who have property at the other end of the country are mad (you know who you are). Any special tools? Are you having a laugh? If I need a mortgage then I only ever get a repayment one and the numbers must work on that - the repayment amount must be at least £200 less than the rent coming in per month. I raise the rent every year so, after some years, the rent runs away from the mortgage payment. When I buy a property I always look for damp, the boiler, parking... the basics. It really isn't rocket science... it's just buying things. When I get to choose appliances, I always go Bosch.

          There. That's probably everything I know. Oh, what I also know is that everyone is different and there is no documented winning formula.

          Comment


            #6
            I'm in the middle of buying our first BTL, so what the hell do I know.

            Firstly we looked at 3 houses with 1/3 of a mile of where we live, dismissed them, because a) we live in an overpriced part of the region. b) they needed too much work (hence why they were so cheap) and c) because we'd need to borrow 75% and d) the likely demand would be low and rents were not likely to be great.

            Then we looked at the cheap end of our region about 7 miles away, where we could afford a house in cash, and decided that a) it would be painful to own something in beruit.

            Then we looked at 3 terraces in an expensive suburb, looked at 3 semi's that were homes under the hammer specials, and then got side tracked looking at a 2 bed flat in a nice oasis of calm in an undesirable suburb about 4 miles from that. Then we took a lot of advice, decided that we were not looking for a fixeruper, and started thinking like the tenants we'd like to have. We honed what we were looking for by looking what we could afford with a 40% deposit, my insistence that it had to be freehold, and need less work than my own house, in one particular area, which was popular with the "right sort of people" which looked like 5 or 6 streets in a 2 mile radius, of which there were only 4 houses which met our specification on paper.

            So it was that we went from a possible 5000 homes with 20 miles which we could afford, down to one house which I'm waiting to find out about the mortgage valuation on. Time will tell if it's a good decision, but I am sure it is.

            Comment


              #7
              Thanks for all your great replies so far. . Pjackon, Hippogriff was good to see your advice. Best of luck LogicalLean also on your first property. Was really great hearing your story and has definitely helped!

              Can I ask you all when you talk about rental yield etc - what tools do you look to identify the level of rent you think you will be able to achieve from a property? How have you found 8% is that through negotiation on price to below market value?

              Also do you mainly look online to source properties? if so which websites? or what other methods do you use to source the best properties?

              Thanks again!

              Comment


                #8
                I mostly rely on my letting agent for how much rent I could get - backed up by checking on Rightmove.
                I mistyped. I meant 7% gross. That is fairly easily done where I buy. My last purchase was almost 7.7%.
                Only one of my properties might be described as BMV - a forced sale to pay for care costs.

                Comment


                  #9
                  My strategy is to swoop in when people have completely given up on a particular property and they are just ready for handing the keys over

                  Comment


                    #10
                    I personal opinion, you are asking the wrong questions.

                    No one can predict what will happen in say 2,5, 10 or 20, 25 years in terms of house price and rents. That is the kind of time frame you need to think about, as that is the length of your mortgage.
                    No one foresaw Northern Rock and the sub-prime crisis.

                    Don't believe the opinion of an economist.

                    In my opinion, house prices are in a bubble, as interest rates are low. A BTL mortgage is around 5%, but if interest rates start to go up to 2% as announced by BOE, then interest rates become 7. The return on many BTL is around 6%. In risky (or lucky) areas the return can be 8%. Is it worth it?

                    I personally think you should be content with your two BTL.

                    The Government is becoming hostile to BTL, even though one in five MPs is a landlord. George Osborne changed tax rules by removing Wear & Tear allowance and changes to mortgage interest as an expense.

                    Aside from increase in the minimum wage, I can't see the outlook for BTL to be particularly rosy. If property prices crash and you need to sell in a hurry, then crystallise any losses in value (negative equity).

                    if Britain leaves the EU, they would want some limit people from those countries and it would certainly impact. I am not in favour of increased immigration, however, there will be a drop in demand.

                    You are not accumulating houses, but accumulating debt!

                    Comment


                      #11
                      It is hard to predict, but not so hard to be prepared.

                      If interest rates go up it won't affect me for a while since my mortgages are all fixed. Since such an increase would likely be accompanied by some inflation rents may well have increased by then, so they may still be profitable. If not I wouldn't have to sell them all at the same time.

                      The value of the property crashing would be unlikely to make me want to sell.

                      Comment


                        #12
                        Originally posted by Flashback1966 View Post
                        I personal opinion, you are asking the wrong questions.

                        No one can predict what will happen in say 2,5, 10 or 20, 25 years in terms of house price and rents. That is the kind of time frame you need to think about, as that is the length of your mortgage.
                        No one foresaw Northern Rock and the sub-prime crisis.

                        Don't believe the opinion of an economist.

                        In my opinion, house prices are in a bubble, as interest rates are low. A BTL mortgage is around 5%, but if interest rates start to go up to 2% as announced by BOE, then interest rates become 7. The return on many BTL is around 6%. In risky (or lucky) areas the return can be 8%. Is it worth it?

                        I personally think you should be content with your two BTL.

                        The Government is becoming hostile to BTL, even though one in five MPs is a landlord. George Osborne changed tax rules by removing Wear & Tear allowance and changes to mortgage interest as an expense.

                        Aside from increase in the minimum wage, I can't see the outlook for BTL to be particularly rosy. If property prices crash and you need to sell in a hurry, then crystallise any losses in value (negative equity).

                        if Britain leaves the EU, they would want some limit people from those countries and it would certainly impact. I am not in favour of increased immigration, however, there will be a drop in demand.

                        You are not accumulating houses, but accumulating debt!
                        Of course people can predict what will happen over time frames, they do it all the time but are not always right. Its pretty safe to say in 20 years time property will be at a higher level than it is now unless we end up in a war.

                        Lots of people for seen the crash coming, many economic advisors such as Fred Harrison were warning Tony Blair and Gordon Brown about this.

                        I am not sure house prices are in a bubble, possibly in London but certainly not in most of the UK. They are affordable and wages are rising so they will become even more affordable.

                        It means absolutely nothing if interest rates go up =- Do not be fooled by people saying this should worry you, it should not. What matters is what banks charge for there money - If base rate is 2% banks may be charging a smaller margin of 1.5% = total of 3.5%. Base rate is 0.5% banks were charging a margin of 4% = total of 4.5%. Bank margin has dropped by around 1.25% in commercial markets since about 2010 so even if rates went up 1% chances are you would be paying less than you would in 2010. Its pretty obvious when you think about it, banks had no money and wanted a premium for it but as banks re capitalise and there balance sheets increase the market becomes more competitive and they lower rates hunting for business. RBS are re entering the market and will be sold off, peer to peer lenders are popping up all over the place many doing property already, new banks and loan companies are increasing.

                        The other factor is that the government will not raise rates until the economy has recovered and inflation has taken hold - rents will probably of risen as well as house prices/wages - again think about it, which government will raise rates without this happening? most people own a home and it would take a pretty brave government to adopt a policy that makes everybody poorer.

                        I do not think you should be content, I think now is great time to buy in most of the UK. In the stage of the 18 year economic cycle we are in about year 6 so the timing seems good to me.

                        The government is not becoming hostile towards BTL but is looking to regulate it more and possibly tax it more but like any sector good tax planning and management should be all you need.

                        outlook for BTL in most of the UK looks good with favourable conditions.

                        Who cares what you think about immigration as the people are already here, the increases have already happened in population. The demand is huge, we have again failed to build enough and it will take years to catch up. The M3 money supply has also continued to rise meaning there is more money in circulation, sooner or later this will make its way in to property through inflation.

                        I have heard these points so many times but basic economics tells you its a wrong opinion. Common sense tells you as well when you sit down and think about it

                        Comment


                          #13
                          When looking for a BTL investment property, you should investigate :

                          1. the letting agents in the neighboorhood to ascertain if the rental demand is high or low. Its no use buying a property and then having to wait 3 months for a tenant.
                          2. the streets are safe at night .
                          3. no adverse factors which may prevent property price rising e.g located near to council refuse dump or facing cemetry etc.

                          Comment


                            #14
                            Thank you for all the advice so far - one last question -

                            which tools do you all use the most for your research?

                            ie what offline research and what online research sites do you all use?

                            Comment


                              #15
                              And for any interested in money supply -

                              http://object.cato.org/images/hanke-img5-62012-full.jpg

                              Comment

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