Are you looking to invest in property but don’t know where or how to start? Here are some do’s and don’ts that you should be aware of when investing.
Here in the UK bricks and mortar is seen as a great way to provide an income and could even provide a welcome change in your career. However, it doesn’t come without any risk and these need to be carefully considered before you make any life-changing decisions.
First, ask yourself what you intend to do with your investment property. Are you intending to let it to the short or long term letting market or are you intending on renovating it to sell on for a profit?
Ultimately the route you choose will be based on your personal situation, resources and the time you have available.
Buy to let
When you embark on a buy to let journey, you’ll be purchasing a property to rent out and manage. Over time your investment will deliver a net cash flow known as your rental yield. In addition, you’ll also benefit from any capital growth.
With affordability still a barrier to ownership for many people, the rental market is strong. In fact, according to a recent report from Citylets, Scotland is the fastest location in the UK to recoup your buy to let investment costs in the UK, for both property price and Stamp Duty charges, based solely on the average annual rental return, with annual rent repaying costs in the fastest time at 17.7 years. Northern Ireland was the second fastest, at an average of 18.9 years, followed by England, at 25 years, and Wales, at 26.4 years.
Building a portfolio isn’t easy and should be seen as a long term plan and the upfront costs carefully considered. You’ll need to pay for a survey, mortgage arrangement fees, solicitor fees and LBTT.
Margins will be tight when you start to invest so you’ll need to be patient in building a successful portfolio before seeing a return on investment (ROI).
You’ll also need to factor in extra costs such as maintenance, management and insurance/ You also need to work out the income from the short term lettings market compared to finding a longer term tenant. With a short term let, the income will be much higher, but you have to consider the time involved, the additional running costs and increased wear and tear. This could be a profitable option if your property appeals to the tourist or business accommodation market. Be aware that running a short term let can take as much as 40 hours a month and involves a lot of work. On the flip side, a long term tenant will require less time and work, but you have less flexibility and your income could be lower.
The other direct property investment route is to buy a property to renovate and sell on for a profit. By adding value, you need to be aware that whilst renovating the property will stay empty and the longer it takes, the more it will eat into your profits.
With this approach you not only need to take into account the renovation and decorating costs but also the costs of buying and selling the property too, all of which will impact your profit. However, with the right property you can potentially make large sums of money when you sell. You will be taxed on any gain so seek professional advice.
If you decide that property investment is for you, you’ll also need to consider:
- Can you fund the purchase and associated costs?
- What are the tax implications?
- How do you feel about risk?
- What type of property are you going to buy?
- What is your location?
- Who is your market – long or short term tenants?
- Are you doing this alone or with financial support?
- Have you fully researched property prices and what rents well?
- Do you know the rental income you can expect?
Talking to the right property professionals is key – these include an independent mortgage broker, an estate agent and solicitor.
At The Mortgage Hub we can offer independent expert advice on the best Buy to let mortgage to suit your circumstances and can offer advice on property investment and the implications.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.