Writing an article on the best places to buy to let runs the risk of leaving you a hostage to fortune.
The postcodes offering the highest yields might have dropped down the charts in six month’s time, equally areas which seem less than appealing now might see fortunes change and become strong contenders.
So rather than just listing the best places right now, we’re going to take a look at how to pick the best places to buy whenever you choose to invest. That’s more use for you, even if it does make it more difficult for us. We can’t just copy and paste the league table from elsewhere!
Here are a few things we think you should consider.
Local knowledge v national stats
It’s unlikely that the best average yields are right on your doorstep – you therefore have to weigh up your own local knowledge, and knowledge of other areas against investing in the areas with what, on paper, appear to be the best rates.
Let’s use an example. At the time of writing, average yields in Maesteg, south Wales appear tempting, while average property prices are also relatively low, which might appeal depending on your available funds.
However, do you know anything about Maesteg? Do you know which streets are worth investing in, who the main employer is, or what, if any, development plans or risks there are for the future? What type of tenants would you be likely to get; families, students, contractors, young professionals?
All this can of course be found out for any area with a little research, the question is are you happy investing just off the back of the core yield figure, or do you need to have more of a natural understanding of an area?
One tactic to strongly consider is investing north of the border following changes announced in the government’s spending review.
We’re sure you’ve heard all about Stamp Duty increases to properties you buy in addition to your main place of residence; these changes potentially adding many thousands (and tens of thousands in some postcodes) to property purchases.
However, the changes don’t apply in Scotland, so a quick, simplistic piece of analysis would suggest that Scotland HAS to have become more appealing; property purchase prices have dropped in relative terms.
At the House Crowd, we don’t believe so blunt a piece of analysis is necessarily true, as the experienced purchaser can negotiate money off the purchase price south of the border to negate much of the Stamp Duty increase.
Even without the Stamp Duty changes though, Scotland offers many appealing investment opportunities. At the time of writing, they have nine of the top 10 areas in the UK by annual yield according to a useful tool, which brings us to…
Use available tools and reports
Newspapers, websites and financial institutions regularly run reports on the ‘best’ areas for buy to let investments.
Most of these are snapshots in time, in fact they are often snapshots of a time past, published a while after the data was actually acquired; by the time you invest based on the report they might have gone past saturation point with other investors jumping on the bandwagon.
Other tools offer more real-time analysis; take a look at the LiveYield website, and the interactive map on that site. With this site you can see the top performing areas by yield and capital growth, stats for any town or postcode and also a wealth of other data charts.
Of course, just talking to people helps too! Estate agents, other investors, employers, people already renting in the area. Knowledge is power.
How deep is your pocket?
Based solely on average yields, London isn’t the most appealing buy to let prospect, but again that’s very blunt analysis.
With London there is no danger of a collapse in the sector, there will always be huge demand for rental properties and there will also always be hot spots – get in there at the right time and you can expect strong returns and enormous capital growth.
However, the average property value in London is approaching £500,000 – if you’re reading this a fair while after we published you can probably add another couple of hundred thousand to that!
To invest in London you obviously need a healthy bank balance which will rule it out for a great many people.
It is also worth noting that figures suggest that a quarter of landlords with a single buy to let property aren’t making a profit – many in fact making a loss. Making a loss on any property could be disastrous, but are the implications worse if you have spent so much on a London buy to let?
Outsource the buying
If you’ll excuse the obligatory plug for our own services, there is another way – you can invest in properties hand picked and bought by buy to let experts with local knowledge.
At the House Crowd, we offer crowd funded property investment, in short you can spread your investment pot across numerous properties, with all properties chosen by buy to let experts with experience of both the market in general, and the property’s locality.
If you have £50,000 to invest, rather than this being the deposit on one property in a relatively cheap area, it could be 10 £5,000 investments in different properties – thus spreading risk and also allowing you to invest in a range of properties and areas, increasing the likelihood that some will be in real hot spots.
To sum up
Do your research – use the available tools and weigh up where you feel comfortable investing and how much help you’ll need. Help could be crowd funded buying, but it could also be just the level of support you need with a property you buy; will you take care of all management yourself, or pay for a managed service?
If you’re investing well away from home, does that mean you’ll have to pay for property management, and if so does that swing the figures in favour of local investment you can oversee yourself?
There is a wealth of data, help and expertise out there – use it all and you have a great chance of making a great investment. We wish you luck.
To find out more about our crowdfunding property investments please register below.