Mark Twin once said, “Buy land, they’re not making anymore”. Whether you enjoy his books or not, you can’t argue with that kind of logic. Like most natural resources on this amazing planet of ours, there is only so much of it. Whereas the worlds population is growing, reach almost 8,000,000,000 by 2020 and they will all need somewhere to live. The prospects of buying UK property for investment purposes has never looked better, so we’ve put together a list to make the most of the thriving UK property buy-to-let market to help you.
Don’t just consider the rental yield
This is an investment as a whole package so consider it as such. Rental yields in UK property have provided profit for many investors in recent times but it’s a property’s rental yield and capital appreciation combined that the real savvy individuals look closely at. London property prices increased by 17.6% in 2014 whilst rental yields typically provided 5% returns, do your maths on all aspects of the investment, you will want to sell your property for a significantly higher price that you bought it for and realise the increase in value.
Take account of costs
It’s pen and paper time. If you are planning on financing your purchase partly with a mortgage then you will want your monthly rent to cover your monthly mortgage repayments. There are also purchasing costs such as stamp duty as the keys are handed over. Once your property is up and running and rented by tenants then there’s the operating maintenance costs and agent’s fees typically taking around 25% off your gross rental income. It is an investment so let your decisions be guided by your head rather than your heart.
A ‘peace of mind’ investment
Presumably you do not live close to your rental property, if you are based abroad you will probably have to travel thousands of miles away to visit your foreign property, therefore you would probably look for a completely ‘hands off’ management approach. You do not want a late night phone call from a tenant asking you to deal with a broken window or a leaking water pipe. Search for companies that offer a full service, there are a few companies that offer not just the initial product sale but also a comprehensive after sales service that covers everything from furniture packs to full property management including dealing with maintenance and breakages. Your objective is to relax and sit back in your armchair and watch your investment grow.
Don’t forget to read: The Crossrail Effect on UK Property
Location, location, location
The three most important factors when purchasing a UK property are location, location and location. A cheap property is usually cheap for a reason and vice versa with expensive properties. There are many thriving, booming areas of the UK where property prices and rental yields are propelled upwards mainly due to regeneration schemes and improved local transport links. Be sure your investment fits this basic criteria, do your research as it’s easy to get your fingers burned in a location that will suffer no regeneration and a downward trend on property prices. Worse still is a property in an unpopular location that sits empty for months generating zero income.
Consider your tenant
Instead of imagining that you are living in your property try to imagine you are the tenant who is renting your property. Who are your tenants likely to be and what do they want, what are they looking for? Young professionals might be looking for something different to students. A young family will again want something totally different, perhaps they are looking for something not furnished, students want fully furnished – this will affect your interior décor decision amongst others.
Research the market
London, Manchester, Liverpool or Milton Keynes? One bedroom, two bedroom or three bedroom? A duplex or a triplex? Student accommodation or residential? The questions are endless, the options are endless and often bewildering especially if the chosen country of your intended investment is not your country of residence. The key is to do as much research as you can. If you are looking to invest in the UK then speak to someone (preferably an expert) from the UK, if you are thinking of London then do your research on London and try and talk to someone from London. UK property investing has paid off handsomely for many people, both in terms of income and capital gains but it is essential that you go into it with your eyes wide open, acknowledging the potential advantages and disadvantages.