Investor Guide

Our experience in the property market in London and the South East means we are perfectly placed to help you find the right property and get the most from your investment.   Whether you are considering your first buy-to-let or looking to expand your investment portfolio, we can help.

Types of property investment

Depending on your aims, property investment can be a short or long-term commitment used to generate income, add to a retirement fund or deliver capital growth as the property’s value appreciates.   A few options are explored below:

  • Buy-to-let: buying a residential property to let it to residential tenants.   Buy-to-let investments can generate rental income, providing the revenue covers any mortgage payments and other costs, such as maintenance and repairs.   These investments can also return mid to long-term profits through capital growth, providing the value of the property appreciates.
  • Buying off-plan: buying a property before the development is complete, and in some cases it may not have even been started.   The advantages of buying off-plan can include cheaper deposits than those on completed properties and the potential to influence design features, fixtures and fittings.   In addition, buying the property at a fixed price before completion means you can benefit from 100% of any increase in the property’s capital value, and there may be discounts available for bulk purchases.   In some cases, you may choose to sell on the property before it has reached completion (known as flipping contracts).   In order for this to be done the contract must be assignable, and we recommend that you check this prior to proceeding with a purchase of this nature.
  • Buying at auction: savings can be made when buying at auction, as many properties are sold below the market rate.   A winning auction bid constitutes a legally binding contract, so it is important to conduct thorough research of any properties of interest and have your finances ready ahead of the auction itself if you intend to make a bid.
  • Land investment: as with property, the value of land can rise and fall as market demand changes.   Major infrastructure projects can significantly influence the value of land by increasing demand in a particular area.   Keeping up-to-date with developments through government and industry sources can help identify potential investment opportunities.   If the land has pre-approved planning permission, this can increase its value.

Buy-to-let guide

The benefits and risks of property investment

There are many potential benefits to investing in property and the financial returns can include both potential capital growth if the value of the property appreciates, and a regular rental income from the property.

Buy-to-let mortgages are generally more expensive than standard residential mortgages, both in terms of arrangement fees and interest rates.   Additional costs are maintenance and repairs to the property and any void periods when the property in untenanted.

If you have a buy-to-let mortgage where the monthly repayment could increase due to interest rates, a tenant’s rent cannot be increased until the tenancy contact has expired.   As with any investment, the value of the property (the asset) may depreciate and the expenses could outweigh the income from the rental yield.

Financial aspects

Buy-to-let mortgages are usually more expensive than residential mortgages as lenders often consider them to be higher risk, and stamp duty rates are higher, so any difference should be balanced by the rental yield.   Although some lenders will limit the number and / or total value of buy-to-let mortgages available to an individual, others may provide services to help private investors expand their portfolio.

Buying a rental property outright will mean the net rental income will be greater as there won’t be any mortgage repayments to make.   Alternatively, an investor may choose to spread their money across a wider portfolio.   When evaluating these options, it is highly recommended to get independent tax advice to fully understand the associated risks, benefits and tax implications.

Properties have low liquidity and cannot always be sold immediately if you needs to quickly recoup your money.   However, unlike investments in stocks and shares, it is possible for you to directly influence the value of a property through renovation, depending on market conditions.

Rental income can be subject to income tax and profit made on a property sale may be subject to capital gains tax.   However, rental yields in London have been increasing year-on-year, and potentially some costs can be offset for some property sales. Again, speaking to a tax advisor should form part of your investigation.

Let-to-buy mortgages

If you want to move home but not sell your current property, or if you find yourself unable to sell your existing property, let-to-buy is one option.   This will let you move into a new home without being pressurised to sell at a potential loss.

If you have enough equity in your property, you could re-mortgage and release funds to put down a deposit on a new home.   The rent you would receive from your existing property would help to cover the cost of the let-to-buy mortgage, and enable you to take out a mortgage for your new home.

Choosing the right investment property

It is important to research the property market in the area in which you are looking to invest thoroughly.   For example, any plans for local development could affect a property’s value in the future.

There are also benefits to owning an investment property close to where you live, as you can oversee it more easily, and maybe even manage it yourself.   Meanwhile, using a letting agent opens up a wider geographic area, but of course the cost for using a letting agent must be taken into account.

When you’re looking at investment properties, also consider the type of tenant the property is likely to attract as the tastes and requirements of different tenants will differ.   Families, young couples, students, and tenants on housing benefits all have specific needs, and different types of tenant will appeal to different landlords.

Managing your investment

For a rental property to fulfil its potential, it is important to have a suitable tenant ready to move in from the date of completion.   The process of finding a tenant and the ongoing managing the property can be handled by a letting agent, and there are several levels of service available.

Landlords will need to use a government-approved scheme to protect the tenant’s deposit, and there are a number of other landlord responsibilities which should be understood.

Once the initial process of becoming a landlord has been covered, many investors look to spread their investments and expand their property portfolio.