Buying Investment Property

Buying Buy To Let, HMO and Portfolio Investment Properties

Buying an investment property has been a popular decision for years and the current demand for rental properties is higher than ever before due to house prices rising. If you’re in a position to invest in property, it can provide you with long term financial stability. Property is one of life’s most valuable and appreciative assets.
What to consider when buying

Investment property is extremely different to buying personal property and the purchase should be treated as such. There should be no emotional attachment to investment property and therefore the top factor to consider when making a purchase is the property yield.

Rental yield is the return a property investor is likely to achieve on a property through rent. It is a percentage figure, calculated by taking the yearly rental income of a property and dividing it by the total amount that has been invested in that property. 

Why is yield most important? If the figures don’t work for you then the investment isn’t a positive one. If your income falls short of your expenditure, then you lose money. If you are breaking even, then you are not making any money. And, if your income doesn’t leave room for contingencies then a broken boiler or a problem with a roof can put you seriously in the red.

Next, consider the investment location. You should consider the strength of the location, the rental yields that are on offer, the level of demand and the potential for capital growth. It’s also important to look into areas that have positive predictions for price growth and a proven record of investment success. Capital appreciation is extremely important and should be considered when considering your exit strategy.

Ceiling Value. A ceiling price indicates the maximum price a property of a certain size has ever achieved in that street or location. It is good to look at comparable and sold prices to know what a property of the same calibre has achieved to understand that there is room for capital appreciation. Not only this, but there will also be a rental ceiling price too. This will help you evaluate the potential monthly income against all costs before making an informed decision.

HMOs make superb investments but only when managed correctly. The level of work required to maintain a HMO is extremely more than a traditional buy to let and this should be fully explored before investing in one. The potential rental yield is extremely higher than that of a traditional buy to let but this factor must be weighed against the monthly expenditure and level of management required. 

Most HMO investors are already landlords and have a great understanding of property and property law unless they are looking for their HMO to be fully managed by a HMO specialist agent.

Benefits to investing in a HMO over a traditional buy to let:

  • The rental yield can be up to 3x higher than on a traditional buy to let.
  • With house prices on the increase HMOs offer a solution to affordable housing
  • Rental voids are less impactful as numerous tenants means as one leaves there are still others paying rent while you’re looking for a new tenant.
  • Lower exposure to rental arrears. If one tenants falls behind with their rent you still have multiple other tenants keeping up with payments so there is a lower risk of a negative financial impact.

Be sure to consider the competition in the area you’re looking to purchase a HMO. Some areas have a high number of operational HMO’s and too many means a high risk of flooding the market. This can mean supply outweighing the demand and causing void periods and rental reductions in order to fill the rooms.

Consider the facilities offered to your prospective tenants. Covid-19 has had so many impacts to us all and one means tenants are spending more and more time at home. HMOs benefit from a communal area/living room which means tenants are not confined to just one room and have the space and ability to socialise with other tenants and relax.

Lastly, consider the legislation that comes with running a HMO. Rules and regulations are constantly changing and not keeping up with them can result in some hefty fines. Remember, a good HMO agent can take care of all of this for you.

Investment property is extremely different to buying personal property and the purchase should be treated as such. There should be no emotional attachment to investment property and therefore the top factor to consider when making a purchase is the property yields.

Rental yield is the return a property investor is likely to achieve on a property through rent. It is a percentage figure, calculated by taking the yearly rental income of a property and dividing it by the total amount that has been invested in that property. 

Consider each property, in turn and whether they are achieving market value at the rent they’re currently receiving. Do your due diligence on what is good and healthy yield for the property locations and compare to the ones you are looking to invest in.

Due diligence is key when buying a portfolio as this is a large, long term investment. This type of investment should carry huge thought before and all the through to an exit strategy, should the need call for freeing equity quickly.

Consider –

  • The discount you’re receiving as your buying them all together rather than them being sold separately.
  • Freehold vs Leasehold. Depending on your investment strategy there are different things to consider when investing in leasehold property such as
    • Lease length
    • Service charges
    • Ground Rent
    • Obligations as a Leaseholder
  • Condition of the properties. Do any works need to be carried out both internally or externally? Are all the properties key turn ready?
  • Location. Are all the properties local to you? Will you be requiring a managing agent?

Location is key when looking to invest in student accommodation. It goes without saying that you must be in a good proximity to a university or college. Not all students drive so walking distance will prove hugely beneficial if not on a bus route. 

Occupancy. Remember, university and college courses generally only operate 10 months out of the 12 so there will always be a gap between one course finishing and another starting. You must factor this into your finances.

Yield. What is the property currently achieving? The yield is the percentage figure, calculated by taking the yearly rental income of a property and dividing it by the total amount that has been invested in that property.

Maintenance and dilapidations. As we all know, life as a student can look somewhat different to that of life far beyond our student years. As a student your accommodation is temporary and sometimes, as a result, accommodation can be treated in a way that reflects this. Ensure you factor in contingency costings to ensure you are not left short or in any financial difficulty.

The main difference between the income of a holiday let and a traditional buy to let is the change in consistency. A traditional buy to let offers the same rental income month in month out. A holiday let differs immensely depending on the time of year. Consider the peak off peak times and ensure you factor this into your finances. Holiday lets tend to be very seasonal, depending on their location, and the rental income will reflect this. 

Location is key when choosing a holiday let and potential customers will look for proximity to local attractions and amenities over anything else. Evaluate how close you are to a beach, town, shops and all other local attractions. How good is the local transport? Does the property accommodate the type of custom you are looking to attract?

Compare. Do your due diligence and look around the local area at what is already on offer. How does it compare with what you will be, potentially, offering?

Owning a holiday let can be beneficial when it comes to your exit strategy. The accommodation now offers more than one use which attracts a wider audience thus making it more saleable.

We sell & acquire for clients

 Investment Properties

 HMO's

 Vacant Commercial Buildings

 Let Commercial Buildings

 Care Homes

 Retail Property

 Offices

 Development Land

 Unconsented Sites

 Consented Sites

Benefits of selling with tenants in situ

No void periods

You receive income until the day of completion. If your property sits on the market empty for a few weeks or even longer then you are already at a financial loss. By selling with your tenants, you’ll receive rent up until the day of completion. If the date of completion is part way through the month, then the rent will be apportioned by the solicitor.

More attractive to investor purchaser

Selling with tenants in situ is more attractive to an investor purchaser. Why? There is no void period once the completion takes place so the buyer incurs no costs or time vetting potential, future tenants.

No renovation neccessary

There is less of a requirement to spruce up the property before the sale. Most potential purchasers looking for buy to let property will be more interested in the rental yield the property achieves over a well pruned garden.

Less stress for Landlords

If you choose to evict a tenant before selling you may cause them to feel insecure and vulnerable. Very often, tenants refuse to allow viewings until after they have vacated the property, and they are quite within their rights to do so. Those that do allow viewings may not keep the property clean and tidy, so it may not show well to prospective buyers. These are all headaches for a landlord and can be avoided by selling with the tenants in situ.

Subscribe To Our Investors Mailing List


By submitting this for you declare that you have acknowledged and agreed with our Privacy Policy

Compare listings

Compare