It’s not all about location, location, location when it comes to buy-to-let investing. Property type is another key consideration for investors. You’ll need to put your business hat on, seek impartial and professional investment advice where appropriate, and take the time to weigh up factors such as property type, rental yield, capital growth, level of tenant demand, and whether you plan to maintain such an investment in the short, mid, or longer-term.
For longer-term investors, capital gains will be an important consideration, and recent data from Zoopla shows that terraced properties bring in the highest capital gains, and this is true if you sell the property after five years or 20 years. Studies also show that period properties tend to rise in value more than new-builds.
If you’re planning to invest in a Victorian terraced property, it’s worth considering who your target tenant is. These types of properties tend to be favoured by young families or first-time buyers, so if you’re buying a property with a view to letting it out, you’ll want to bear this in mind.
So, what are some of the pros and cons of buying a Victorian terrace to let?
What are the pros?
- Many renters (and sellers, should you ever decide to sell) will like the period detailing (assuming this is preserved) and unique features found in an older property. Such features may include cornicing, sash windows, open fireplaces, architraves, and high ceilings. The Victorians were noted for incorporating ornate architectural designs into their domestic buildings, and this can be evident in even the most modest terraced property. Period features continue to be a real attraction for tenants and buyers.
- Period terraced properties can be renovated to add value. The rooms can be of a good size, which appeals to tenants, but for investors looking to maximise rental income, adding value can mean higher rents and capital gains.
- With a terraced property, there is usually scope for converting it into an HMO (Houses in Multiple Occupation). This would be relevant if you wanted to rent to at least three tenants who are not a single ‘household’. According to Mortgages for Business, in 2017 HMOs produced the highest rental yields of all buy-to-let property types, with average yields of 8.9%. However, if you decide to convert a terraced property into an HMO, you will need to obtain a licence.
What are the cons?
- Before buying a period property, make sure you have an appropriate housing survey carried out to establish whether there are any structural defects or issues, large or small. This is vital as it may impact the sale price – from the findings you might be able to negotiate a lower price for the property should you choose to continue with the purchase.
- A Victorian property is more likely to require repair and maintenance work. This work may need to be completed before tenants can move in, so it might be you’ll have to wait some time before you can start drawing a regular rental income.
- How energy-efficient is the property? New-builds and homes built within the last ten years you can generally expect to be more energy efficient than a property that is over 100 years old. Tenants are becoming increasingly concerned with energy efficiency and should always ask to see a property’s EPC rating. With the new minimum energy efficiency standards kicking in in April, landlords need to make sure a property they let out as part of a new tenancy has an energy efficiency rating of no lower than ‘E’. Upgrading a Victorian terraced property to be more energy efficient may be costly.
If you are set on investing in a Victorian terraced property, you will need to consider location and whether this type of property is in demand from renters in your chosen location. Once you start viewing properties, always consider aspects of safety and security, noise, proximity to amenities and transport, heating, lighting, and the construction of the property. Will it be a good investment? Will it let for the price you’re looking for in the local market?
There are numerous questions to ask yourself, and our advice is to speak with a local letting agent who will be able to guide you in getting to know the location you’ve chosen. Find out more about investing and letting property in W14.