If you’re looking for your next (or even first) buy-to-let investment, it’s likely that you’ve got lots of ideas about what type of property you should buy. Selecting whether to invest in an old or a new property can be challenging. Both have their positives and negatives and there’s no singular ‘right’ answer to this. To help you decide, we’ve provided an overview highlighting the pros and cons of new and old houses.
Off-plan purchases and new builds
When you’re buying an off-plan property, you’re buying one that hasn’t even been built yet, so you often meet with the developer. But, should you opt for what they’re offering based on designs and an artist’s impression, or something that’s already available in the area?
New build houses and off-plan purchases have many advantages. For one, they were built to be homes. Purpose-built residential complexes will often feature a range of practical and convenient additions.
Newly built apartment blocks will typically feature a lift, widening their appeal to young families or people with limited mobility. New housing estates will usually provide allocated off-road parking and residential street lighting, which enhances safety and security. Again, this is likely to appeal to a wide demographic of potential tenants, particularly families.
Location selection can be another big draw for investors. New build complexes are created due to the demand in a particular area, so the likelihood of finding a tenant relatively quickly is higher. They tend to be situated close to local amenities, with good transport links which instantly ticks boxes for a wide range of potential tenants.
Another major bonus in buying an off-plan purchase is that, if you’re first in the queue to meet a developer, or if there are still many properties remaining, you may be able to negotiate on the price. Securing the property at a cheaper price could mean a larger return further down the line. Additionally, there’s often the option to select your preferred fixtures and fittings so you can customise the property to what you best feel would appeal to your prospective tenants.
Firstly, if you’re buying off-plan, you can’t move tenants in right away, as building work needs to be carried out and completed. This means that, if you’re investing in off-plan property, you have to be willing to wait before bringing in initial returns on your investment.
Additionally, with new build homes and complexes, there can be teething issues. These are often basic issues such as lights not functioning properly. These can be tiresome if you have a new tenant, as it can lessen the likelihood of them staying for the long-term. However, if you can get through these (if they appear at all), then your tenant is likely to love their purpose-built property, lowering the chance of void periods and increasing your opportunity to attract a long-term tenant.
However, if you’re willing to wait, new build and off-plan homes are often worth the reward. The long-term nature of the investment means that the property could have gone up in value before your tenant even moves in.
Established and period properties
Established and period properties are also very appealing for landlords and tenants alike. However, as with new builds, there are a number of advantages and disadvantages. These include:
If you’re buying an older property, character and period features can have a wide appeal. Some tenants simply don’t like the ‘feel’ of new homes, concluding that they lack character and personality.
In older homes – and for some the older the better – there’s character aplenty, with period features such as open fires, wooden beams and traditional sash windows. For many, this can be an enticing prospect, suiting their tastes perfectly. As a landlord, this is also important. The more someone feels at home in your property, the more likely they are to want to stay for the long term. If you can keep a tenant for a number of years then you’ll reduce the risk of void periods, in turn maximising your return on investment.
Depending on the type of let you’re wanting to pursue as your investment, older properties are often larger and lend themselves well to being converted for multiple occupancy. If this is a route you’re considering, you’ll need to seek planning permission from your local authority before thinking of committing.
Firstly, although converted barns, lofts and mills may aesthetically seem very appealing, they can sometimes prove problematic due to access issues and facilities such as phone line and internet installation and the reliance on oil fired central heating which can lead to higher home running costs for tenants. Ultimately, they weren’t designed to be dwellings, and this can become apparent over time.
Additionally, the older a home is, the less energy efficient the property is likely to be, and this can be a turn-off for some tenants; especially when they see the energy performance certificate. In addition, if you buy a property that doesn’t meet energy efficiency standards then you may have to pay a significant sum for upgrades to this.
If you’re buying an established or period property, then ensure you check it thoroughly and get it surveyed by experts. The older the property is, the more likely you are to find problems with internal aspects such as wiring, and external aspects like the pointing or roof condition. Surveyors should be able to help you with this though. Finally, remember to look at the basics such as the age of the boiler. If a boiler appears to be getting towards the end of its life then replacing it could be quite costly.
As we’ve already said, there’s simply no ‘right’ answer when it comes to buying old property or new as a buy-to-let investment. Most importantly, check what lets well in the area that you’re looking to buy, and constantly keep in mind the amount you’re thinking of charging. This way, you can work out your yield and ensure you’re maximising your investment potential.