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The Potential of a Buy to Let Investment Property

Apartments V Houses

If the demand exists and you are able to quantify it, invest in an apartment rather than a house. The main reasons for this are:

• apartments attract a mobile population and are always in high demand, particularly in city-centre areas;
• apartments require less maintenance, reducing annual expenditure;
• apartments are usually less expensive to buy and easier to sell;
• upper floor apartments are more secure during void periods;
• apartments generally occupy less space and therefore require less furniture, carpets and equipment;
• a garden will require attention during void periods; an apartment balcony will not.

However, bear in mind:

• in rural areas, small family houses with a garden may be in higher demand than apartments;
• apartment blocks may have a service charge for maintenance and common area upkeep which will have to be paid whether the property is occupied or not;
• the enjoyment of an apartment is dependent on there being thoughtful neighbours above, below and to each side;
• the cleanliness, decoration and general condition of the external aspects and communal entrance hallways will be controlled by the management company, whereas with a house the owner is usually directly in control;
• apartment owners are often prohibited from letting their property by the lease.

Investment Property

'Investment property' is a title often given to dwellings that need considerable repair. They may appear attractive to the novice landlord simply because of their low price but buyers of this type of property need to be aware that:

• A comprehensive survey is essential before submitting an offer, so that all defects are identified and realistic costs of repair can be obtained from contractors.
• There will be a void period from the day of purchase to repairs being completed when no income will be earned. Despite this, there may be charges to you as the owner for council tax, electricity, gas, service charge and/or management- fees, which will have to be paid from personal funds.
• The property may be in a run-down area with neighbouring properties in a comparable poor condition and this will reduce the long-term letting potential.
• It may be difficult to obtain a mortgage, as most lenders will not want to accept the risk of repairs being completed. Any loan granted is therefore likely to be low and the lender may also require additional security.
• The investment property may be classed as a HiMO (House in Multiple Occupation) and lack the minimum fire-safety and other standards required for such dwellings. Some landlords are now disposing of these properties, with vacant possession and at a low market value, to evade the long-term improvement costs.