Buying a house to occupy vs buying as a property investment
It's no secret that buying a house should suit your needs, but it greatly depends on what those needs are.
When you're buying to occupy, you only have to think about your own personal needs and preferences. Is your family growing or are the kids likely to move out soon? Do you have a pet that needs space to run? Are you looking to work from home?
But how do you deal with a situation where you are choosing a residential property based on the needs of other people - how can you predict what a family might need?
One of the best things about buying an investment property over other types of investment is that you get to make the decisions around the purchase and management of your investment, so starting out with a clear plan about the tenants you have in mind will make your purchasing decision a lot easier.
No single property is going to please everyone. Each person, couple, family or group of friends is going to have different needs and wants so if you keep that in mind you won't be trying to please all of these groups at once.
Instead, consider keeping an open mind about who you're looking to keep as tenants and work backwards from there, looking at possible rental properties and asking yourself if they would meet your tenants' needs.
For this, you'll need to consider the location of the property in relation to community amenities.
Families will be more interested in school zones and nearby bus routes, whereas young couples might look for social spots with bars and restaurants.
Keeping an open mind about your tenants will offer you a broader scope. If you're set in thinking that you are looking for a studio apartment for example, you may miss a great deal on a three-bedroom townhouse in the suburbs.
One of the most important figures you'll need to calculate when searching for a suitable property is the rental yield. This number is the annual rent received calculated at a percentage of the purchase price.
Most mortgages for buy-to-let properties are signed as an interest-only deal, where the initial borrowed amount is not actually paid off over time. This means that your rental income needs to be higher than the regular interest payments you're making for you to see a profit.
Buying for someone else won't be easy, but it won't hurt to keep in mind that if you wouldn't want live there, then you can't expect your tenants to either.