If you’re considering investing in property, then you may feel uncertain about where to begin.
After all, investing in property can be an overwhelming experience: you need a large deposit, you take on significant debt, and you need to make the right critical decisions.
Here we give you the five essential steps you need to take before you buy property to maximise your investment.
- Set Your Goals
The first step is to be clear on what is your goal for your property investment. Is it to:
• Create ongoing cash flow from the profit you receive from the rent, or
• Make money from increasing the value of the property
Of course, you may achieve both by holding a rental property for the long-term. However, it is important to decide what your goal is to ensure you purchase the right property for you.
For example, a city flat will generally grow faster in value than a house in the outer suburbs. However, the house will potentially give you a higher profit each month.
The decision on where to buy and what type of property depends on your short, medium and long-term goals.
- Know Your Strategy
Investing in property presents many strategy options. Before you decide on what type of property you want to buy, be clear on your strategy. This may include:
• Renovate and convert the property into an HMO to maximise your rental return
• Hold the property for the long-term increase in value
• Build property to sell
• Renovate older properties to increase their value for sale
Once you decide on what strategy will work for you, then you can narrow down the choices of location, property type and features.
- Find the Right Location for You
Now that you know your goals and your strategy, you will have an idea of what type of property you want (flat, townhouse, HMO, house) and which tenants may be interested in your property.
Once you narrow this down, you can then determine suitable location options.
When researching locations, it’s important to consider not only where the growth areas are, but also which locations are popular for young professionals, families, students or retirees.
For example, if your strategy is to buy a flat to increase the value of the property fast, then you may consider city locations that would suit young professionals.
When you are researching locations, also consider things like:
a) Is it in a safe neighbourhood?
b) Is it walking distance to transport?
c) Is it walking distance to London Central?
d) Is it close to great restaurants, pubs, squares, parks?
e) Is it close to schools, universities or leisure facilities?
- Know What Property Structure You Want
Once you’ve settled on a location, the next step is to decide on what property structure you want: a freehold, leasehold or an HMO property.
Is one a better investment than the other?
The fact is, most flats in England are leasehold, while most houses are freehold properties.
The Unique Details About Leasehold…
• When you buy the property, you buy a lease from the freeholder
• The freeholder is responsible for the upkeep of the communal areas. The freeholder must insure the building against fire, destruction and damage.
• You will need to pay an initial purchase price and an annual ground rent, annual service charges, maintenance fees and a share of insurance for the building
• You cannot undertake any significant works on the property without the permission of the freeholder
• You may be subject to other restrictions, such as subletting rooms or pet ownership
The Unique Details About Freehold…
• There is no annual ground rent to pay because you own the land
• You have sole responsibility for maintaining and managing the building and land
• Freehold is the common way of selling houses, although some new-build houses are recently being sold leasehold
The Unique Details About HMO…
The definition of an HMO is a ‘multi-let’ rental property that has three or more tenants, not from one household/family, that share amenities. This can include:
• A house which is split into bedsits or units
• A house, or flat share, where each of your tenants has their own tenancy agreement
• Students who live in shared accommodation
• Properties above commercial buildings (such as shops, offices or restaurants)
However, following the recent Government changes to the HMO rules, it’s important to know if the property you are purchasing complies with the HMO rules and has an HMO licence.
- Know What Property Features are Most Valuable to Tenants
The final step in selecting a property is to find the one that provides the most valuable features that future tenants will pay more for.
This includes features such as:
• Lots of natural light
• Allowing pets into the property
• Low maintenance garden
• Providing high-speed internet
• Including parking of any kind, but particularly off-street dedicated parking
• Close to transport links: for inner-city locations, this includes bus and tube stops; for properties outside the city this includes easy access to major roads and a local train station.
• Communal shared spaces
• Modern, clean and practical designs using quality features
Ultimately, you’ll attract better tenants if your property has features which are in high demand.
Investing in the Right Property
Maximising your property investment success starts with being clear on your goals and strategies.
We recommend that if you are thinking about investing in a property that you start by getting professional advice, so you can make a considered decision.
At REKA Property Management, we give our clients the facts about the property industry.
If you want to know how to achieve solid rental returns and have peace of mind with your property, then call us on +44 (0) 203 286 6468 or email us at Admin@RekaProperty.co.uk