When looking at buying property to rent out rooms, you need to look at the market closely. Do your homework. Seek professional advice. Watch out for any scams and remember the saying “if it sounds too good to be true it probably is”. Below are a few basics to help you on your way.
This is vital to the success of your project. If you want to realise the best return on your investment, don’t buy the place up the road because it’s convenient and cheap. Visit several locations and get a feel for the area. See if there are good transport links, schools nearby, shopping facilities etc.
Now look at the target market you are after, does this area have the demand? Are you looking for professionals, students or low income professionals? Put yourself in their shoes, will the property and area you choose suit your target market, are there facilities to accommodate these markets close by i.e. university, business or retail parks etc.
When looking for the right property the first thing you need to do is decide on your maximum budget, then search for properties within this figure taking into account any repairs that need undertaking. Whether you are looking for a property that’s ready to be occupied or requires refurbishment, it is always advisable to take a professional to view the property with you, to advice on any unforeseen costs that you have not taken into account. To gain maximum return on your investment, make sure you utilise all available room options i.e. if there are 2 reception rooms, is it feasible to convert 1 into another bedroom.
Unless you have the money upfront you’ll have to see if a mortgage provider can supply you with a buy to let mortgage, remember to shop around for the best deal. Buy to let mortgage lenders normally want a 15% deposit and the rent to cover 125% of the mortgage repayments.
Before buying a property remember to do your sums and work out the price of the property against rental income.
If you were looking at buying a 3 bedroomed property with 2 reception rooms for £140k, let’s see what income you would get back if you rented all 3 bedrooms over 10 years at £70 per room per week:
£70 per room per week x 3 rooms x 52 weeks x 10 years = £109,200 /£10,920 per annum/£910 per month.
And if you were to convert a 2nd reception room this would generate a further £303 per month.
Now look at your mortgage repayments, council tax, bills and maintenance etc. Can you stay on top of the repayments, also taking into consideration the minimum number of weeks tenancy per annum you need to attain to achieve the required return.
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