The UK remains one of the most attractive property investments markets globally. This is despite the uncertainty surrounding Brexit and the generally depressed house prices in some parts of the country. Investors favour the relatively stable economic environment and good property returns.
Understanding a couple of fundamentals before getting started is very important. Let us look at the main ones;
1. Decide on the financing options.
You would need funds to buy your investment property. There are various funding options to choose from. The important thing is to plan how you are going to finance your investments.
If you are going to get a mortgage, it is good practice to get your mortgage approved before you start searching. Many good property deals fall off as a result of delays and problems in mortgage processing. Whatever your choice is, be sure to get your finances sorted as a starting point.
2. What is your strategy?
When investing in the UK, there are a couple of strategies or asset classes you could consider. Although the property market now has a lot other creative investment alternatives, here is an outline of some of the most popular ones;
a) Buy to let
The most popular buy-to-let groups in the UK for residential properties are;
- professional buy-to-let:
- student buy-to-Let
- corporate buy-to let
The most popular buy-to-let groups for UK commercial properties are;
- leisure /hospitality
- industrial / warehousing
b) Buy to Serviced Accommodation
This is some form of buy-to-let strategy which of late has proven lucrative for most investors. Your property is rented on short stay periods ranging from a day to a couple of weeks.
If the occupancy rates are good, Serviced Accommodation (SA) generates much more revenue than the standard monthly rental contracts. Platforms like Airbnb play a major role as a driving force behind SA for listing bookings. When embarking on SA as a strategy, an investor should understand the rules at council and city level. For example, operating SA in London has limitations because of the 90-day rule. The 90-day rule limits the time a property can be let as SA to 90 days. Getting licencing for operating 365 days a year can be a lengthy and complicated process. If you are unfamiliar with the procedures, it is important to get expert guidance.
Buy to Serviced Offices: In the commercial sector, the rise of serviced offices is an increasingly popular option, getting a steady uptake from commercial property investors across major cities, especially London and Manchester.
c) Property flips
With property flips, investors buy properties, refurbish and sell at a profit. As an example, you find a property valued at £140,000. You spend £30,000 total cost on refurbishments and costs. After refurbishment, you sell the property for £210,000 making a profit of $40,000. The time to complete a project varies from project to project depending on complexity and project management skills.
d) Property Development
This could be develop-to-sell or develop-to-let. Investors are increasingly moving towards property development as stagnant prices in some parts of the country and high taxes affect the buy to let market. Development usually requires huge investments. Proper due diligence should be done to ensure a good returns.
e) Joint ventures
Investors may choose to joint venture with other investors for financial contributions. They may joint-venture with other trades for expertise, connections and other non-monetary benefits. Possible joint venture partners include property developers, architects, decorators, buying agents, contractors etc.
3. What is your level of involvement?
Every investment has a level of involvement for the investor. Property investment is no exception. Determining your level of involvement helps to decide what you would need to do yourself and what you would need to outsource. Reasons for outsourcing may include;
– lack of time (busy professionals or investors with other commitments)
– long distance (investing from a different town or country)
– creating better efficiencies (need a skilled person to handle it)
– Hassle-free investments (taking a hands-off approach)
Investors can outsource all or selected activities; property finding,
negotiations, refurbishments, property management, operations, portfolio building services and exiting.
4. Location, location, location
The location that you choose should tie in with your investment strategy. Just a few examples below;
If you are into student accommodation, you should consider cities with a high number of student population. University cities like Leeds, Manchester, Nottingham and many more.
If you are into Houses of Multiple Occupancy (HMOs), you need to consider that the properties are within reasonable walking distance as most HMOs tenants would need to access the city centre without use of transport.
If you are into commercial properties, you should consider industrial growth prospects, rates of employment, vacancy rates and many other factors.
5. What are your key performance indicators?
When sourcing for the right investment property, the ultimate result should be financially sound. There is a common saying that goes ‘When in property, don’t invest with emotions, invest with numbers”. As an investor, the focus should be on the figures to ensure the deal stacks, finance-wise.
You must always pay attention to your Key Performance Indicators. KPIs at time of purchase. Monitoring variations along the way will go a long way in ensuring a healthy property portfolio in the UK. The most common KPIs in property investments are return on investment and rental yields. You should consider adding to your portfolio a property asset that promises a high ROI and highest possible rental yield.
6. Ability to measure and benchmark property performance
You should be able to regularly do a benchmark analysis with comparable properties. You should therefore have a fair knowledge of the benchmarking parameters prior to investing. It is advisable to have periodical portfolio reviews with an expert. An expert would be able to track macro and micro conditions and deep-dive into trends. Having this clarity will go a long way in guiding your investment actions.
7. Your exit strategy
What is your exit strategy? This is a question that you will need to ask yourself at the beginning of the investment. Whatever your investment strategy, a property deal that stacks should have a great beginning and an even greater ending. You should therefore have the end in mind before you start searching for properties.
8. Assemble a winning team
To be a success in UK property investments, you cannot operate as an island. Property investment encroaches into many different fields, which may be out of your area of expertise as an investor. You would therefore need to assemble a winning team, to take care of your accounts, tax issues, legal issues, refurbishments, property management and much more. A standard team would comprise of a Property Finder, Accountant, Lawyer, Contractors, Letting Agents, Mortgage Brokers and Asset Managers.
9. Finding the property
“Money is made in property at the time of purchase” is a common and yet a very true statement. Your ability to find an ideal investment property determines to a large extent your success in UK property investments. You must have a good mechanism of sourcing properties that match your criteria.
Engaging the services of specialist property buyers’ agents like Yieldfast would go a long way. Unlike a standard real estate agent who works for both property buyers and property sellers, a property buying agent or property finder works exclusively for property buyers. This eliminates conflict of interest, removes limitations to access off-market properties held by competitor estate agents. This increases your chances of getting the best negotiated and most profitable property deals. Professional property finders also have specialist area knowledge and research data in greater detail. They usually have large and diverse networks enabling you as an investor to get the best property deals faster, saving you time and money.
The UK is one of the most attractive property investment markets globally, making it attractive to local and overseas buyers. There are great opportunities for savvy investors who have a solid strategy right from the start. i.e. well before the searching starts.
Chipo Madusise ; Founder @ Yieldfast Property Finders.
It’s time consuming and not easy to find an ideal investment property. At Yielfast, we are dedicated to helping property buyers from around the world to invest effectively in UK property market. From off-market to high yielding property deals, we custom-source according to individual investor requirements. You simply have to tell us your requirements and we will start searching on your behalf.
Email : firstname.lastname@example.org
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