Beginning UK Property Investment? Here are 10 tips you need to know
What is an Investment Property?
An investment property is the term for any property bought by the purchaser for reasons other than for residential use. The purchaser, which may be an individual or a company, buys a property with a view to making a profit off that property. This profit may be earned by reselling the property, sometimes after renovation. A return on the original investment may be sought by achieving a rental income from the property.
Sometimes the property investor will look to use both methods to achieve a return on their original investment, renting out the property before later selling it for a profit.
How do I get started with UK Property Investment?
The best way to get started in investing in property is to conduct research. Knowledge is key to any successful investment, and with the property market changing all the time it is vital that an investor understands where and how to invest in property in the UK. That’s why PropertyData is such a key tool for any investor. With tools such as yield hotspots, growth zones and construction cost calculators, PropertyData has everything the prospective investor needs.
How much do you need to invest in property in the UK?
Less than you might think. While cash-rich buyers will always be at an advantage, many mortgage lenders offer a range of products for investors, such as buy-to-let mortgages, which are specialised products designed for landlords. Try our helpful Mortgage Finder to quickly assess your options.
Is UK property still a good investment?
While many industries have been hard hit by the current global pandemic, the UK property market has seen a recent increase in transactions.
As our newsroom shows, for example, residential transactions rose by 15.6% in August 2020.
Where can I find the best places for property investment in the UK?
We have developed our Local Data tool to provide investors with detailed, location-specific data to make the best-informed decisions possible.
Our Top 10 Tips for Property Investment UK
1. Residential or commercial?
One of the first things to decide is what sector you want to invest in, commercial or residential property.
The most obvious advantage of commercial property investment is the lower rate of taxation when making the purchase, namely land tax and stamp duty. See our Stamp Duty calculator to work out how this impacts your potential investment.
On the other hand, residential properties have the advantage that mortgages for such properties are easier to get. In addition, it could be argued that they are a safer investment since tenants are usually in plentiful supply, and profits can be more reliable when it comes to resale.
2. Prioritise rental yield
If you invest in buy-to-let properties, the most common form of property investment, it’s important to prioritise the amount of rent the property can be expected to return. While house prices can rise a great deal in a short period of time, they may also fall. By focussing on the amount of rent a property can be expected to generate over a long period of time, an investor can build up a store of capital that can be invested in further properties.
For example, a property that returns a rental income that is greater than interest-only buy-to-let mortgage repayments allows the investor leeway for any unexpected costs, such as maintenance.
3. Consider students
While students may not have the best reputation in wider society, they can be a good source of rental income. One of the advantages of investing in student properties is that student populations tend to be focussed in particular areas of cities near universities, meaning that there is great scope for acquiring multiple properties over time that you can be sure will be in demand by students. The UK student property market has also seen high, consistent growth for more than five years now, meaning it’s a proven area in which to invest.
4. Letting agents
It’s important for anybody investing in property, particularly for individuals rather than investment groups, to decide how much personal involvement they want (or are able) to have with the running of properties they invest in. This may depend upon location, since if your properties are within easy reach of where you live it will be easier to attend to any issues yourself.
Letting agents are advantageous in that they will take the daily running of your properties off your hands, leaving you free to seek further investments. They will collect rent, resolve disputes, and source new tenants, which can be an invaluable service for a busy landlord. Of course, this service comes at a premium, which is usually between 5% and 15% of the rental income. They may also charge an additional fee at the beginning.
5. Expand your search
This is connected to the above tip about letting agents. While it may be tempting to stick to what you already know, you should consider investing in property in any area of the UK that your research tells you is a good opportunity. It may be that for your budget and situation, a property further afield is the right one. Even if that means employing a letting agent to do the localised work for your, or renovating through a company you communicate with remotely, it may turn out to be more profitable than staying local.
Our postcode data map has the vital information on every part of the UK you need to make an informed investment.
6. Don’t fear debt
While it may be intimidating, especially for first-time investors, to contemplate the amount of capital outlay at the beginning, debt is usually an important step in a property investment journey. Investing in property can take a number of years before it begins to show a return, but that doesn’t mean it isn’t an immensely profitable sector.
7. Avoid over-reaching
Following on from the above point, it is important not to try and take on too much, too quickly. Just like a first-time buyer looking for a home it is wise not to buy a house that takes up all their budget and leaves them nothing spare to spend renovating their new home. Investors should beware of the temptation to be greedy. Buying one investment property that is within budget and waiting until there is a store of capital to make a new investment is preferable to taking on too much at the outset.
We have developed a number of useful tools, such as our Build Cost Calculator to help you quickly estimate how much you can safely take on at once.
8. Consider off-plan properties
Investing in an off-plan property means buying a property that has not yet been completed. These will be new-build developments, often over very large sites, which means the level of your investment will be scalable.
One of the advantages of investing in off-plan properties is that the company constructing the properties will often be keen to attract investors and offer a competitive rate. A newer property will also be less likely to require the maintenance and refurbishment work that some older properties will need.
9. Visualise your tenant
Knowing who you would like to sell or rent your property to will be key in guiding a successful investment. For example, you might want to rent to students looking for a house share, or couples looking for their forever home, or small local businesses who want to be part of a thriving community. All of these tenants can impact your investment decisions.
This might sound like an obvious point, but you would be surprised how many buyers take a quoted price at face value. Many factors could mean that you are able to negotiate a better deal if you do sufficient research. For example, if a property has been on the market for a long time the buyer is more likely to accept a lower offer to secure a sale.
It’s important to remember that as, for example, a buy-to-let investor, you are not part of an onward chain and accordingly are in a strong position for negotiating.
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