ARE YOU CONSIDERING investing in the UK property market? Investing in bricks and mortar has been a long-held tradition, and for very good reason. With low interest rates and stock markets in constant fluctuation, buy-to-let properties are an attractive option for those looking to invest.
The residential property market, overall, has one of the most stable growth patterns in the investment markets. It’s important to note that when you become a landlord, you’re essentially running your own business. As a form of investment, buy-to-let allows you to invest your money, while remaining totally in control of your monthly output.
Of course there are risks involved in becoming a landlord, along with strict compliance that both you and your property must adhere to. Here are some tips to help you get started.
SPOT THE RIGHT AREA
Your first important decision to make is which location you want to invest in. Think carefully about this choice, which is more complicated than it first appears. Spotting the nice part of town is straightforward, and it doesn’t take an expert to do it.
But it may not be wise to invest there as property prices are already relatively high. Investors and developers need to be skilled at spotting small pockets of cheaper property on the outskirts of this area, which can be absorbed into it over time, leading property prices to rise.
Ask letting agents for their suggestions as they have the local knowledge.
START SEARCHING IMMEDIATELY
Even if you’re not yet ready to buy, it’s helpful to be aware of the different types of properties coming onto the market, how long they remain on sale, and what price they sell at. Start to track this online, using property sales websites. You might want to set up email alerts for suitable properties so that you’re the first to see them.
But don’t just look online. If you find a potential property that’s been listed on a major website, a lot of other buyers will have found it there too. You’ll be in a stronger negotiating position if you have less competition, so work a little harder to find a property. If you see one in real life that interests you, make an enquiry. It won’t always get you anywhere, but if it does, you’ll be the only buyer in the running.
MOVE QUICKLY ON AN OPPORTUNITY
You should be ready to buy at any time, as some of the best investment opportunities come out of the blue. You might get a bargain by buying a property at auction. Or you might find a seller who’s willing to drop their asking price if you can move quickly, perhaps because they’re in financial difficulties or are selling an inherited property.
So, it’s crucial to have your finances lined up in advance. If you’re buying with a mortgage, have an Agreement in Principle for the amount you’re able to borrow, and have your deposit ready in a cash account. If you’re buying with the help of other financing, such as a bridging loan, a broker can help you prepare.
ALWAYS PRIORITISE PROFIT
An eye for detail is essential. If there’s anything that could reduce the resale value of the property, be it Japanese knotweed, noisy neighbours or encumbrances, you need to spot it and be prepared to walk away.
It’s important not to let your personal feelings dictate your investments. Unlike buyers purchasing their own home, you should never offer over market value because you’ve fallen in love with a property. Buying below market value gives you the best chance of recouping your investment even if the market falls. Remember also to budget for stamp duty, estate agent fees, surveys and conveyancing, as these will eat into your available capital.
MAXIMUM INVESTMENT RETURN
So, you’ve bought your first investment house, and you want to flip it quickly and easily. How do you make sure that you can get maximum return on your investment?
‘Flipping’ is when you buy a property at one price, perhaps do some work to improve it, and then sell it at a higher price, banking the difference in value as profit. The key to successful flipping is looking for property in ‘up-and-coming’ areas, or those that require a bit of work, but not too much.
You should also look for properties that have potential, have at least two bedrooms and have space to carry out work or extensions. The money you make can then be used to purchase a bigger or more expensive property, allowing you to invest more and reap more when it’s flipped.
Some investors like mixed-use properties, as these have a commercial let and a private let under one title.
BUY TO LET INCOME
Due to the coronavirus pandemic, some people have been looking for different ways to generate a second source of income. The idea with buy-to-let investments is that you purchase a property, rent it out and then profit from the monthly rent that is paid to you as the landlord. You can either purchase the property outright or use a buy-to-let mortgage.
To make a profit when purchasing a buy-to-let property, it’s important that you consider location, safety of the neighbourhood, proximity to schools or (if you’re looking to rent to students) universities and proximity to transport links, as well as whether the home has a garden, attic and space to park the car. All of these allow you to set a higher rent.
HOLIDAY LETTING
An alternative to a buy to let is a holiday let. This is where you rent the property out to holidaymakers, who only stay for a few days or weeks.
Holiday letting can be very lucrative when done right. But there’s a lot more time and effort needed to keep it running successfully.
Although quite similar to buy to let, there are a few differences between a holiday let mortgage and a buy to let mortgage.
