Investing in property over time can be a lucrative investment option if done correctly. Its widely reported on average, property prices double in value every 7 – 10 years . However, the property market is cyclical so investment without research or knowledge can become costly.
When considering property investment, there are numerous points to consider, each of which we have touched on below. In addition, there are also a range of investment strategies from armchair investing to being involved with full refurbishments. Which is right for you will depend on your knowledge as well as time and funds available and our next blogs looks into investment strategies.
Finding an Investment Property
Investors tend to run their calculations on possible capital growth and yield. The reason the north has been so popular in recent years is that yields can often be found 8% or above when compared to areas such as the South East and in particular London usually half this. However, if capital growth is your preference then the South East has generally performed better in recent times but with the recent pandemic time will tell if this continues.
One thing for sure, is if your investing in property through a mortgage a number of key figures will need to be met before the lending is approved. These criteria can vary dependent on the market with the current pandemic resulting in down valuations from surveyors and lenders now requesting higher loan to value ratios.
Costs Associated with Buying a Property
Dependent on your strategy the costs to refurbish will vary, however the principles of purchasing will remain the same. To purchase a property, you will need a solicitor (conveyancer) as well as a surveyor and if requiring a mortgage then a mortgage adviser would be recommended also.
There is also stamp duty land tax (SDLT) payable although the Government has introduced some nice incentives until March 2021.
Solicitor / Conveyancer
These will in effect look after all the legal aspects of the purchase as well as the required land and property searches. They will ensure the property can be legally purchased as well as check if there are any risks to the property (for example – flood) and prices vary dependent on area and property type. Be sure to follow up with your solicitor regularly as its common for your purchase to be delayed due to the demanding workload on conveyancers.
Utilised to conduct a detailed report of the property and identify any defects or dilapidations with the property which could result in costs you hadn’t accounted for.
A good surveyor can save you thousands as they may identify problem areas you have missed when viewing the property. This new information can be used to renegotiate the sale or stop the sale if too expensive to rectify
Used to ensure you are getting the best possible deal on the huge selection of mortgages available. Setup fees, length of mortgage as well as interest rates can be confusing so for a small fee an adviser will search the whole of market to ensure you are on the best deal to suit you.
Dependent on your circumstances, this is likely to affect when and where you wish to buy. When investing, most will approach in one of two ways both of which are touched upon below, however for more experienced investors further options are available.
Buy to Let Mortgage
Usually considered as a higher risk than a traditional mortgage lenders usually have higher interest rates and request a higher deposit also.
Traditionally Buy to let mortgages have often been in the individuals name however in recent years it is becoming more common to invest within a company name due to recent tax changes. This is dependent on your investment strategy but a good mortgage broker should be able to advise on the pros and cons of each.
Another option is to buy the property outright and this often puts the buyer in a stronger position when negotiating with the agent / vendor. On the positive side, there are no mortgage repayments to factor into outgoings, however there are often better ways to utilise these funds from a strategic viewpoint.
Is investing Still Right For You?
If you are considering investing in UK property, our team of property finders are active investors themselves. They are happy to have a no obligation chat to discuss your wishes and how we could possibly assist.
For any further information on specific areas please feel free to contact us on +44 (0) 161 282 5558 or myself personally at email@example.com