Location will be key for property investors in 2012

Location will be key for property investors in 2012

Low returns on savings versus strong demand for rental property will continue to drive investment in the UK buy to let market in 2012, predicts property investment specialist Assetz, but new investors should be selective about where they invest in light of continued economic uncertainty.

To help guide investors who are making their first foray into buy to let, at a time when short term capital growth prospects are poor but rental returns are strong, Assetz is offering the following advice:

1) Location, location, location. Choose an attractive location with a sound employment market, which is not too reliant on manufacturing or the public sector. These areas could see 5% or greater growth. Areas which are struggling with high levels of unemployment will see very low transaction levels next year and a fall in value of as much as 10%.

2) Know your tenant. Investors should always have a particular tenant market in mind when buying a property. If you are aiming to let your property to a professional couple, for example, it is likely to require a car parking space or proximity to good public transport, two bedrooms, a high quality kitchen and bathroom and a sleek, modern finish. Local knowledge or specialist agents will help you find a bargain above all else.

3) Decide whether to be an investor or landlord Consider how much time you have to dedicate to your investment. If you work full time and want to invest in a buy to let property on the side, it will be worth instructing a local letting agency to manage the property on your behalf. Many first-time investors are surprised by the amount of work involved with directly managing a buy to let and delegating most of the day-to-day tasks in return for 7 to 10% of the rent is well worth while for most people.

4) Make sure the property you choose is a sound investment. It is essential not to let your heart rule your head in property investment. Unless you are buying a personal holiday home which you want to rent out for just a few weeks a year, your decision should be based on what your target rental market requires, and not your personal tastes!

5) Know the local rental market. Investors should always investigate how well similar properties have let over the previous twelve months in your chosen location. Speak with local agents and find out what rental incomes are being achieved and which properties are most popular in that area. It isn't just rental income that is important, but overall volume of demand, as this could reduce the 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 +5% next year, as the banking sector failure, consequential restricted mortgage lending and poor employment prospects has left a whole generation of potential first time buyers with little prospect of buying a home. Consequently, landlords are set to benefit from another year of strong yields, albeit alongside only modest capital growth for the time being."