Invest in UK property: A beginner’s guide

Invest in UK property: A beginner’s guide

You might be of the opinion that buying any kind of property currently is not the best idea.

In the past few weeks alone, the UK’s exit from the European Union has become even more clouded and less certain than at any other stage during the past two years.

So, is property a good investment in 2019?

Yes, property still remains a solid and robust investment, whether you’re buying a home to live in or if you are purchasing to develop or rent out.

If you are looking to become a property investor, however, you need to know what you’re doing – particularly if you are aiming to rent out your investment property.

You need to be financially well-drilled and, sometimes, be willing to take a calculated risk.

Property investment for beginners is not for the faint of heart, but our guide on how to invest in property can help…


How to invest in property

It’s often a word that doesn’t mean very much at all, but when investing in property you need a strategy.

That means deciding what you are going to do with your investment property before you buy it.

The common property investment strategies are:

  • Buy-to-let investments
  • Property development
  • Off plan new-builds


Buy-to-let investments

Landlords who jumped on board the buy-to-let bandwagon around two decades ago will have done very well from their investments indeed.

And despite tighter regulations around letting properties and increased legislation affecting landlords 20 years on, buy-to-let remains and popular and lucrative investment strategy.

Why?

Because you benefit from rental income and capital growth in your property.

Despite house prices stabilising in many parts of the UK while the country awaits its Brexit fate, buying a home remains out of reach for many, so there is still huge demand for rental properties across the country.

But before flying off to find a buy-to-let investment, it’s important you consider if becoming a landlord is right for you.

Legislation you’ll need to deal with includes Minimum Energy Efficiency Standards (MEES), Right to Rent rules and a multitude of other health and safety regulations.

You’ll need to stay on top of your finances, too, with big changes to landlord taxation that are currently being phased in, not to mention things like stamp duty and ongoing property maintenance costs.

But if done well, buy-to-let can provide an additional or replacement income for landlords, with those in it for the long-term also likely to enjoy good capital growth on their investment.


Property development

We’ve already established that buy-to-let can be a great long-term investment strategy.

But if your aims are more short-term, you could consider property development.

Property development means finding a home in need of work and where you can add significant value, before selling it on for (hopefully) a profit.

Sounds simple, but like buy-to-let, there’s a lot to consider.

Property development is driven largely by speed and market conditions.

So, the more time you spend doing your property up, the more likely you could be hindered by changes to the market.

Costs can also rise over a long period of time, all of which can eat into your profits.

Then there’s finding a property itself.

Auctions can be a good place to buy property at value and often homes in need of work crop up as lots.

Buying from auction can sometimes mean a lack of knowledge about a property, though, so always study the legal pack and try to visit the property before raising your hand with a bid.

Like buy-to-let, you’ll need to stay on the right side of your finances when developing property, too, and factor in any nasty surprises that could delay your renovation work or cost you more than you bargained for.

But it’s possible to make great profits in short spaces of time if you do property development well and buy low, renovate cost-effectively and sell on quickly.


Buying new-builds off plan

If you’re feeling brave and the workload and effort required for buy-to-let and property development doesn’t appeal to you, you could try ‘flipping’.

This is where you buy a new-build home off-plan at an early stage of development and sell on for a profit once work is complete.

Of course, it’s not as simple as that.

Flipping is very dependent on market conditions – so if you buy a property off-plan and there is a dip in the market, you could end up having to sell for less or even not being able to sell at all if you are mortgaged high.

Investors adopting this strategy realistically can only work in a market that is enjoying high capital growth and high buyer demand.

There is also the risk of development work stopping, or a builder going bust part way through a development.

The risks are clear, but flipping, at the right time, can be extremely rewarding for little effort.

 

Stages to property investment

Whatever your chosen investment strategy, you’ll need to go through a number of phases and processes to get your investment off the ground.

And each of those phases will present you with considerations…


Get your finances in order

Establish what capital you have. Regardless of strategy, the more money you can put into your investment, the more profit you will likely make.

If you do need to borrow, work out how much and establish your projected costs.

Having a clear budget, with some wriggle room for nasty surprises, is key.


Property research

Much of your success as a property investor will be determined by investing in the right property at the right price.

You’ll need to consider your target market for renters or buyers and suitable locations.

For example, if you’re looking to target young professional renters with an apartment, is it close enough to the train station?

If you’re looking to develop and sell to a family, what are the schools like nearby?

 

Research mortgages

Getting a good mortgage deal can have a bit impact on your profits.

If you’re going down the buy-to-let route, your mortgage payments will eat into your rental profits.

And with landlords only able to claim a 20% basic rate income tax deduction for their mortgage interest from April 2020, choosing the right mortgage is even more important.

Speak to an independent broker or financial advisor before applying to fund your property investment.


Make the right offer

Whether you’re buying an investment property or a home to live in, getting your offer right is always key.

But for investors, it’s even more important as it has a direct impact on their short and long-term profits.


Solicitors and conveyancers

This is where more research is needed.

As an investor, it can pay to seek out a solicitor with experience of completing investment purchases.

After all, the faster you can complete your purchase, the greater the boost to your profits.

 

Get a survey done

We mentioned nasty surprises earlier and these can be costly, whatever your investment strategy.

It always pays to get a full survey done, particularly if you are developing, so you can limit any unforeseen circumstances that could cost you big money.


If you are looking for a property investment, take a look at our properties for sale or get in touch with your local Whitegates branch.