Buying property for investment has a very steep learning curve. Everyone knows the trick is to buy low, sell high and make a good month to month return in the interim. The reality is far more complex. There are many factors which will affect a property’s current and potential value, and different factors that affect the rental yields both short and long term. One thing I have learned as a buy to let mortgage broker over the past two years is that everyone has a different set of parameters they use to judge a property by, there really is no magic formula to buying property for investment because we all want different things from it.
Therefore, I thought it might be useful, to discuss some of the tools that are available out there, to help define some of these parameters. This is all part of AALTO Mortgage and Property Solutions pledge, to provide total transparency and value for money.
It is almost impossible to buy a property these days without using Rightmove in some way. One point to bear in mind if you use it heavily, is that it’s extremely expensive for estate agents to access, and a few reasonably large agents do not list anything through the portal. It may be worth checking two or three portals just to make sure you are not missing any property.
One thing I have always loved about Rightmove is its search functionality. As an investor, you will probably have a good idea of the exact estates and areas that meet your needs. Getting alerts the day a property that fits your criteria comes on the market can get you ahead of the other keen investors! Using the Draw-A-Search functionality means you can pin point the exact streets and areas that your research has highlighted. It might be the catchment area for a school, or the properties on one side of an estate that are scheduled for a regeneration scheme. Using this system you can avoid the fatigue that comes of having to sift through hundreds of properties every week and ensures that you can react quicker and secure only the property that fits your requirements. You need to be registered on the site for this to be available and can be accessed at the “my Rightmove” on the top right of the page.
Mouse Price has always been a useful resource, especially for its historic property value information, and has an uncluttered layout. It’s actually run by a company called Landmark Analytics who produce the House Price Index (HPI) for the Land Registry which makes it a reliable source of property data. The Company can provide very specific reports for particular properties and areas for a fee, but provides some interesting resources to help you pinpoint some areas to consider for investment. The heat maps are a particularly useful way of measuring average property prices, crime, social housing ratio and other factors that might help you find some bargains.
There have been many reports in the press about the devastating effect of flooding in this country, and after the initial damage caused, the lack of affordable insurance can make properties unmarketable, because without insurance it’s almost impossible to secure a mortgage. Your solicitors will conduct various environmental searches during the conveyance, however these can cost around £300 – £400. The environment agency provides detailed maps showing flood plains, and defences and could help you measure the potential future risk of an area to flooding. Landfill sites and contaminated ground are also displayed on an interactive map.
Department for Education
The number one reasons people give for wanting to move home, is to get children into the best schools. Whether renting or buying, people’s desire to ensure their children get access to the best education cannot be underestimated. If your property is near a good school the demand will be higher which will drive higher rents. Knowing the catchment areas can be tricky because they are redrawn annually depending on the volume of applications. Most local authorities have an interactive map to help. You can search for performance information from a central government database and see individual schools performance information at both primary and secondary level.
ARLA – Association of Residential Letting Agents
The ARLA website is a great resource for anyone thinking about letting a property. One of the things I find most useful is it quarterly buy to let review. The guide provides a very detailed breakdown of the cost involved in running a property, a comparison between yields for cash and geared (mortgaged) properties and a comparison of these returns across regions. This can be very useful when planning an investment strategy because it allows you to fix some of the variable such as capital appreciation, void periods (days without a paying tenant) and rent inflation. The investor profile section can highlight some interesting trends and can provide clues as to where the arket is strongest.
There were many other resources that I would use such as the Land Registry, Zoopla, Local Authority websites etc. but those mentioned are some of the more interesting and useful.
If you would like to discuss any of these please feel free to email me: stuart@aaltomortgages.
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