Frequently Asked Questions
Welcome to BTL Finder. This site can help you find promising areas where it could be worthwhile to invest in Buy to Let properties.
The BTLFinder Website
How Accurate is the Site?
BTLFinder is intended to be a general guide to potential BTL yields across the country. Once you've found an area you're interested
in, then it's time to hit the local Estate Agents and sites like Rightmove
in order to see what's available out there.
One problem with BTL Finder is that yield data is calculated by looking at two different sets of properties: those available to
buy, and those available to rent. It's hard to compare the two sets of properties, particularly as here in the UK we don't generally
sell properties by square metres/foot.
The data shown on the site is also based on asking prices rather than actual prices achieved at sale or actual rents people are paying.
What is "Data Quality"?
BTLFinder collects a lot of data about properties for sale or to rent throughout the United Kingdom. However, some areas have a lot
more properties to buy or to rent than other areas. The less properties for sale or to rent in an area, the more difficult it is
to calculate meaningful data about average prices (and hence yield) in that area.
Why No Information About 6 or 7 Bedroom Properties?
BTLFinder only collects information about studio apartments and 1-5 bedroom properties. In general smaller sized properties are
much more popular with property investors. There are also comparatively fewer larger properties for sale or rent, and therefore the data
quality for larger properties tend to be lower than for studio apartments and 1 or 2 bedroom flats.
Rental yields from 4+ bedroom properties also tend to be lower than those for 1-2 bedroom properties. Outside of London or the
specialised executive letting market, rents
tend to peak at around £1500 a month, regardless of the size or value of property.
Letting out larger properties can also be more complex, due to the legal requirements regarding houses that are considered
Houses in Multiple Occupation (HMO). If you're considering letting out a large property to multiple tenants, then be sure to check
whether your property will be licensable.
About Buy to Let Properties
Why is "Yield" So Important?
In the Buy to Let business you'll hear a lot of talk about property yield. This is the key way in which property investors are able
to assess the potential of a property.
Yield is calculated from dividing the cost/value of a property by the amount of annual rent it can generate.
Pitfalls of Yield Figures
Bear in mind that Yields are gross figures, and the true income generated from a Buy to Let property will normally be significantly
lower than the Yield.
Factors that can reduce the Yield from a property include:
- Property purchase costs such as solicitor fees, survey costs and stamp duty.
- The costs involved in viewing potential Buy to Let properties, especially if you're interested in buying
in an area you're not familiar with.
- Void periods when the property is empty and awaiting tenants.
- Letting agency charges.
- Mortgage costs, including both interest payments and capital repayment. Mortgages also have other costs, such as application
- The cost of property improvements and repairs.
- Management charges on leasehold properties.
- The costs of complying with current regulations, such as those relating to properties that are HMO's.
- Taxes - Buy to Let property is less tax efficient than other investment opportunities such as NISA's.
So when calculating the true
yield of a property, then be sure to account for these factors in your calculations.
What Other Factors are Important in Buy to Let?
Some other factors property investors will look for include:
- The potential for Capital Growth, which is just as important as Yield.
- How easy is a property going to be to let out?
- Does the area have a large student population, and is there good potential for student lets?
- How much maintenance will the property require?
- If the property is leasehold, then how much are the service and ground rent charges, and how many years
the lease lasts for.
- Regular factors every potential property buyer needs to look out for, including planning changes, and proximity to
rivers or flood plains.