An investment property is any property that you buy for financial return rather than to live in. This is mainly done by buying a property and renting it out, although it can also mean buying a cheap property in need of modernisation, and renovating it in order to sell it on for a profit.
As the world economy faces a period of recession, investing in property can be a reliable way of protecting your assets and creating a passive income. In the UK, there is a shortfall of available housing stock, both for renting and buying, so demand will always remain high, even in periods of economic downturn.
The average monthly rental income in the UK (outside of London) is now £936, and rates continue to rise steadily in most areas. Likewise, average property values have grown sharply in recent years, although this trend is now likely to level off as the cost-of-living crisis begins to bite.
When selecting an investment property, it is important to consider the location and type of property carefully. If you are intending to rent the property out, consider the what the local rental market is like. Are average rents in the area on an upward trajectory, and is there a strong demand from potential tenants in the area?
In the UK, certain areas are more profitable for the buy-to-let market than others. Key criteria to judge the potential of a rental property include the average rent paid in the area, how many vacant rental properties there are in the area, what percentage of the local population live in rentals, and the long-term house price growth in the area.
According to Simply Business, Bristol, Oxford, Cambridge, and Manchester are the top five locations for a profitable buy-to-let investment. Other popular places include Leeds, Hull, Leicester, and Nottingham. These are all cities with high student populations, which is likely to create a steady high demand for rentals.
The type of property you buy will also affect the rental yields. For example, semis and terraces are popular with young families, while city centre flats are popular with young professionals and students.
If you want to charge rents in the upper price bracket for the area, you will need to make more initial investment in bringing the property up to standard. This will ensure that you attract the type of tenant who will take care of the property and stay in it for longer period, reducing the amount of void periods (when it is not earning any rental income for you).
If you intend to rent to students who are going to be living in the property for a shorter amount of time, and have smaller budgets, then you will probably spend less on the fixtures and fittings. Many landlords ask for a guarantor when renting to students, as they don’t have regular earnings to cover the rent.
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Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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