With interest rates at rock-bottom levels possibly until 2016, small investors could be tempted to put their savings into bricks and mortar.
But property investment firm Assetz has drawn up a checklist for first-time investors, urging them to be highly selective about where they buy.
1. Location – find an attractive location with a sound employment market and not too reliant on manufacturing or the public sector. These areas could see five per cent or more price growth while areas hit by high unemployment will see low transaction levels next year and falls in value up to ten per cent.
2. Know your tenant - investors should have a particular tenant market in mind when buying a property. Professional couples, for example, usually require parking or proximity to good public transport, two bedrooms, high quality kitchen and bathroom and a sleek, modern finish.
3. Investor or landlord – if you work full-time, get a letting agency to manage it on your behalf. Many first-time investors are surprised by the amount of work involved with directly managing a buy-to-let so delegating day-to-day tasks in return for up to ten per cent of the rent can be worthwhile.
4. Be sure the property you choose is a sound investment and don’t let your heart rule your head. Base your choice on what the rental market requires.
5. Know the local rental market. Investors should always investigate how well similar properties have let over the previous year in their chosen location. Ask local agents what rental incomes are being achieved and which properties are most in demand. It isn’t just rental income that is important but overall volume of demand as this reduces voids between tenants.
Stuart Law, chief executive of Assetz, says: “High levels of tenant demand will continue to underpin the buy-to-let market next year, with numbers of investors and landlords continuing to swell as people seek to generate a decent income from their cash.
“I expect rents to continue growing strongly, in the region of plus five per cent next year, as the banking sector failure, consequential restricted mortgage lending and poor employment prospects have left a whole generation of potential first-time buyers with little prospect of buying a home.
“Consequently, landlords look set to benefit from another year of strong yields, albeit alongside only modest capital growth for the time being.”