Property investment is always an exciting opportunity. If you are thinking of investing in property, there are many things to consider before making an offer. Choosing a buy-to-let property is an investment, so it is essential to follow your head and not your heart.

Our guide to rental property investment will help you know how to find the best buy to let property.

1. Choose a location where people want to rent

Most people expect to buy rental property near their own home. That might be convenient, but it isn’t necessarily going to bring the greatest profit. For an investment to prosper, the area needs to have features that draw potential tenants. It might have excellent transport links that attract working people, or highly-rated schools which draw in families. Or it might be the local university has a large student population. Do the legwork, and choose your location with care.

2. Research potential tenants

You won’t get much out of your investment if you target the wrong demographic for the area. Families want plenty of space and good schools. Young working people need to be near transport and amenities. Students want to be near their campus or faculty buildings. Talk to letting agents, find out where the demand lies, then buy property that meets that demand.

3. Make sure your property will generate a rental income that exceeds your expenses

Ask a local letting agent how much annual rent you could expect to collect from the property, allowing for possible voids. Calculate your annual costs – mortgage repayments, maintenance, upkeep, insurance, professional fees and so on. For an investment to work, your income must exceed your expenses.

Calculating your rental yield will help you understand the level of return an investment property will deliver.

4. Consider your maintenance costs

Maintenance can be expensive and will eat into your profits. Newer properties tend to require less maintenance but can be more expensive to buy.

5. Factor in renovation costs

A less expensive property may look like a bargain, but the cheaper the property is for an area, the more likely it is to need extensive renovation before you can rent it out. Whether it’s heating, electrics, damp or just general neglect, first calculate how much the remedial work will cost. Then work out what you can afford. Then add it all up. Would you be better off paying a higher price for a property that you can rent out straight away?

As a rule of thumb, the value of the property after renovation should be greater than the purchase price by the cost of the renovations plus 20%.

consider maintenance costs6. Examine the trends for property prices in the area

Although you are purchasing the property as a buy-to-let, there may come a time when you want to sell your investment. If you buy in an area where property prices are rising, there is a good chance you will be able to sell your property in the future for more than you bought it for.

Check out the trajectory of property prices over the last five to ten years in the area you’re considering. Past performance may not be a guide to the future, but it’s one of the best guides there is. If prices have consistently increased as well as or better than elsewhere, you may be onto a winner. Consider the area’s future, and check the development plans. Infrastructure projects can affect property prices enormously. Crossrail, for example, will open up travel across north London, creating new commuter routes and opportunities all along the route. But be equally careful to check for development plans which might have a negative impact on the value of your potential property.

You should also consider how long you intend to own the place. Long-term ownership is essential if you are to benefit from any rise in capital value.

7. Look for somewhere with easily maintainable outside space

Outside space is an attractive feature for most tenants. Families will appreciate a good-sized garden for the kids to play in whilst students and young professionals want somewhere they can site outside and enjoy an alfresco meal. Most tenants don’t want to spend their weekends weeding and mowing the lawn so choose a property with an easily maintainable garden.

8. Consider how hands-on you want to be

Buying the property is only the first step; you will also need to find tenants and deal with any problems that arise. Be prepared to give up weekends and evenings preparing advertising, conducting viewings and sorting out repairs.

Hiring a reputable local letting agent to let and manage your property can save you time and reduce your stress levels. Here at M&M Property we have over 20 years experience letting and managing property in North London. If you are considering investing in buy-to-let property in the Islington and Newington Green area give us a call or drop into our office for a chat.