The value of developing your buy-to-let

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20 Jul 2015

The value of developing your buy-to-let investment

Author: Michael Cook

New kitchenWhether you own commercial or residential property assets, the key to making money in the long-term is to maximise its value. This may mean developing your property with significant investment in the short-term, or you may be lucky enough to have a property which is fully developed and there is little more that you can do to it.

Find out more about the value of developing your buy-to-let investments by reading the advice below from Michael Cook, Assistant Managing Director of Romans Lettings:

Does the property need developing?

Very often people assume that the property they buy will need some form of development, whether that is cosmetic or structural. The reality is that not all property investments need further work and often investors acquire a property that is the ‘finished article’. Tenants will no doubt decorate the property to suit their tastes but there is no point in spending money developing the property further just for the sake of it.

On the other hand, do not be afraid to acquire an investment property which needs development. It will depend upon the type of asset, the investment required and ultimately the final target price, but if you can double any additional investment onto the final value of the property (whether cosmetic or structural) this is definitely worthwhile in the long-term.

Local price ceilings

Developing a property can be financially rewarding but make sure you’re aware of the local price ceilings. Unless you have done your homework on the local marketplace, overdevelopment is a trap which many people fall into.

Most local property markets will have a ceiling on the price of property in the area, which means that if you develop an asset further and it goes beyond this ceiling then you may not get full value for money, and possibly end up losing money! Price ceilings are not always set in stone and they can change dramatically if there are developments and changes in the local area.

The bottom line is that before you invest a significant amount of money in developing your buy-to-let property, ensure you are aware of what people are willing to pay in that area for that particular type and size of property.

Ask a letting agent

If a friend was to ask you about the price of property in a particular region you would simply tell them to speak to the local estate agents. Well, whether you are definitely looking to buy an investment property, you’re just testing the waters, or you have a particular development in mind, there is no harm in asking the advice of local letting agents. These professionals work closely with tenants and landlords every day, and know exactly what demand there is for particular types of rental property in the local area.

From an investment point of view, if you’re able to acquire a property which brings in an attractive rental income with minimal additional investment then this could, in theory, fund future transactions. In many ways it does depend on the individual’s own objectives, financial situation and timescales but it is best to mix-and-match when looking at a long-term property portfolio so that you are not over dependent upon one particular type of property or area.

To find out more about the value of developing property investments book an appointment with the lettings investment team at your local Romans branch on 01344 985 699.

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