So you want to become a Buy 2 Let Landlord in Southampton ?

Southampton has been tipped as a Buy to Let investment hotspot by a number of analysts. Rightmove (the property portal) and Oxford Economics have predicted that the city’s property prices will rise by 43% over the next 5 years. Earlier this year HSBC listed Southampton as the number 1 Buy to Let city with an average return of 8.73%. So should you look to invest and what do you look for in a good long term Buy to Let?

Well there are a number of basic factors you will need to consider before looking for your ideal property investment:

• The timescale of your investment is it 3, 7 or 15 + years?
•  Are you after property price growth or a good monthly income? (It’s very difficult to get both  - you tend to trade one off the other – capital growth V’s rental yield.
• What your budget is and will you be taking on a mortgage?

If your investment horizon is under 5 years you should really stick to more prime properties, your rental yield will be lower at around 5.5% but you will have a very attractive asset which should sell quickly when the time comes to exit. 

Chasing higher yields can be very rewarding but a yield of 8.5% attracts this return because of greater risk. Your tenants will most likely include under graduate students, tenants in receipt of benefits and multi lets to workers and professionals. This requires hands on management, you need to keep fully abreast of all the regulations, your wear and tear will be significantly higher and you may need a full refurbishment every 3 or 4 years. It’s not for the faint hearted but we work with a number of landlords who are very successful in these sectors.

If that’s not your cup of tea but you still want a good yield try a 3 bed ex council house in SO 16, 18 or 19. We have secured really good tenants for these properties who stay long-term and make the property their home. Yields here tend to be 7.25%. Capital growth may not be as strong as more prime areas but it should still be good.

As you move more into the Shirley / Hill Lane areas you can find some nice 1 bed units at around the £110,000 which will yield 6.5% to 6.75% and these properties should still be well positioned to benefit from capital growth. Moving to more prime areas such as Banister Park, Westwood Rd and Ocean Village will see gross yields fall to 5.5% to 5.75%. These units should benefit from very good capital growth as long as your entry price is right!

So now you have considered your investment timescale, the type of tenant and the yield you are after, you will now need to pick the right property. You should give serious consideration to the following:

• Size of the unit; a 350 sq. ft. 1 bed won’t get you your yield!
•  1,2 or 3 bedrooms,
• House or flat
• Freehold v’s leasehold
• Ensuites, parking, furnishings
•  Quality of the development
• Maintenance of the common areas

All of these factors and many more will impact on the quality of your tenant, the length of your voids, your yield and ultimate capital appreciation. When it is done right it can work like a dream and at Belvoir we can help you at each step of the journey.

If you would like to discuss any element of letting or managing your property or if you are starting out as a new landlord please do give me a call. We don’t sell property and so we are in a unique position to provide independent advice.