|
Close window
|
 |
GUIDE TO BUYING AN INVESTMENT PROPERTY |
|
|
|
| As a home for your money, is renting “as safe as houses”? The two principal reasons for purchasing a residential property as an investment are to achieve a return on your capital, as well as capital growth. If you are looking for the maximum return with the minimum amount of effort, you should consider purchasing a small house or flat. With regard to capital growth, generally, house prices tend to keep pace with inflation or more often to grow faster than inflation, and over the years most people have seen house prices rise. More importantly, property is not going to vanish overnight. Andersons have been acting for Landlords since 1988, and we have let many different types of property in most parts of North Birmingham. Whilst there is a market to let all types of property within this area, there are some general criteria which prove popular with tenants. Being within walking distance of a railway station on the Cross City Line is a benefit - a bus route is not always a satisfactory alternative. For this reason, properties in Walmley and Streetly can sometimes be more difficult to let. First floor flats are most popular; some people feel that ground floor flats can be a security risk, and the second floor can be a long way to walk. A two bedroomed property with two double bedrooms is ideal; this makes the property more attractive to friends or colleagues intending to share. Properties decorated in plain, neutral colours are much easier to let than those with patterned wallcoverings or carpets. A shower is the single most popular item requested by potential tenants. Some form of heating is essential to achieve a good rental level - if electric, storage heaters running on Economy Seven are preferred; under-floor heating may deter prospective tenants. Gas central heating is always popular. Double glazing is becoming increasingly important and fewer properties coming onto the market for the first time are single glazed. Metal framed windows will deter a prospective tenant. One bedroomed houses and flats tend to be less expensive to buy, and produce good returns. Studio Apartments give a better than average return but do not tend to increase in capital value at the same rate as larger properties. It is a good idea to have one Studio Apartment in a portfolio. There
are several developments of luxury apartments which have been built
over recent months in the Sutton Coldfield area, offering good quality
accommodation in central locations. Many investors are attracted
to this type of property. When purchasing an apartment in the higher
price brackets, it should be remembered that they will not give
the best return on your capital, either from the point of view of
rent or capital growth. Since the implementation of the Housing Act 1988, the law has looked equally upon the letting of a furnished or an unfurnished property, in the form of the Assured Shorthold Tenancy. Letting an unfurnished property has less complications for the Landlord, insofar as any furniture supplied must comply with stringent Fire and Furnishings Regulations; details of this legislation can be provided upon request. If something breaks down in a rented property, the Landlord is obliged to repair it. Therefore the less items in the property to go wrong means the minimum of problems for the Landlord. There are many unfurnished properties available at any one time and relatively few furnished properties, for which a premium can be obtained. If you decide to let your property furnished, it is best to select plain and simple, sturdy items of furniture which will appeal to the widest variety of people. Do not purchase second-hand furniture to put into a rented property - it may not comply with regulations. During the years in which Andersons have been letting properties, a consistent profile has emerged of the type of tenants who are looking to rent. First time buyers are postponing their first purchase and are renting for longer than was previously the case. This is partly due to a change in the employment market where a job for life has been replaced by a series of short-term contracts. Renting a property gives financial certainty in terms of monthly outgoings, and provides a fixed date for the commitment to come to an end. There are none of the problems associated with buying and selling properties. Many companies which previously offered generous relocation packages with bridging loans now choose to rent accommodation for their employees and this is particularly true of companies who are relocating an employee from abroad. For investors, an additional benefit of this type of tenant is that they tend to require two year contracts. Overseas tenants often require furnished accommodation. People going through matrimonial problems require rented accommodation whilst family matters are concluded. These three types of tenant will always require rented accommodation and for them renting, rather than buying will always be their first choice. On a short-term basis, a market is emerging for people who are in between house moves, and this is often a good ‘stop gap’ between tenancies, therefore avoiding the necessity for a void period. Similarly, we are often approached by people whose homes are subject to large-scale works as a result of an insurance claim, requiring accommodation for the period whilst their houses are uninhabitable. Whilst an investor would prefer a long-term tenant, these tenants can keep a property fully let and are often charged a premium to compensate for the costs involved. For some people, renting offers benefits which cannot be achieved from purchasing a property. They have a fixed monthly cost and a firm end date for their obligation. They will not have the costs associated with purchasing a property, solicitors to deal with or surveyors to trouble them. They can move more quickly when renting - purchasing a property takes 2 to 3 months, renting can be accomplished in as little as 24 hours. They are not responsible for repairs or maintenance of the property, and there is no “chain” involved in the transaction. For some Landlords the objective in purchasing an investment is income. For others, the purpose is to provide a future return. If you can provide a deposit of between 15% and 30% of the value of the property, a mortgage lender will loan you the balance (subject to lending criteria). Most clients choose to borrow on an “interest only” loan. If you purchase a property with a loan or mortgage, the Inland Revenue treats the interest on the loan as a cost which can be set against tax; this only applies when the property is purchased with the loan, it does not apply to properties that are re-mortgaged. Other tax deductible items include repairs and renewals, agents fees, insurance, service charge and a depreciation allowance of 10% of the annual rental income if the property is furnished. Please contact us to discuss current property prices and rental values in the north Birmingham area. As Agents, we are actively seeking suitable properties for investment. We will add your name to our mailing list and forward to you details of any properties, which we identify as being suitable for your requirements. If you find a property through another Agent, we will be happy to give our opinion as to its suitability; we will also look at properties available by auction. We are among the longest established Letting and Managing Agents in Sutton Coldfield, with over 15 years’ experience in the market. Our office is situated in a prime High Street location, and we undertake to accompany viewings at evenings and weekends. Tenants are fully referenced by a specialist Reference and Insurance Company. The references will include employers and previous Landlord (where applicable), credit check and file information history. A tenant who has passed the strictly applied criteria will qualify for Rental Indemnity Insurance. Complete details are available in the Homelet brochure. We are able to introduce prospective Landlords to an independent financial advisor, who is an expert at placing “Buy to Let” mortgages with a variety of lenders. If you wish to explore this option, please contact a member of staff. If you require expert tax advice we are in touch with an accountant dealing specifically with Landlords, who would be happy to discuss this with you. We hope that you will have found this Guide helpful. If we can be of any further assistance please contact us. |
|
Back
to TopE & OE