Would-be investors can follow simple tips to see high yields from the property market.
By referring to this advice, private landlords can gain the maximum returns on their investment.
- Identify future opportunities
Top Five Tips for BTL Investors
It is always of interest to developers that the next key areas of the property market are acknowledged. Estate agent Knight Frank has identified Nine Elms in Battersea, Earls Court, and Paddington in London as prepared for huge price increases, due to development plans. However, these areas already sport a high price, so places outside of the capital may be more appealing to investors.
Significant elements to consider are transport, employment opportunities, and development plans.
- Keep it simple
If you’re aiming for either income from a rental property, or a place to live hoping for capital gains, stick to the basics, such as location, transport links and closeness to schools, shops, etc.
Estate agent Huntley Hooper has found that period properties hold their value better than new builds. Towns have also retained their value better than villages in recent years. Nevertheless, prime property always holds value better in market declines.
- Don’t over-spend
It is often thought that investing in property is fool proof. However, as most people have to borrow to buy into this market, losses can be far greater than expected when the industry drops. As a consequence, banks have narrower lending criteria, so borrowing higher than you can afford to pay back is difficult. If you are an investor in the buy-to-let market, issues such as void periods, losing your day job, reduced hours, or long-term illnesses are things to consider when repaying a mortgage.
- Remember there will be negatives
Buy-to-let landlords don’t have money trees, like the rest of us. Despite rental returns currently being high, the demand-outweighing-supply situation could change. If more people are able to buy a house, and credit conditions loosen, first-time buyers could be putting landlords out of a lot of business.
If prices are to drop further, the value of good properties will decrease, and tenants may not want to pay the same rents.
Additionally, a new initiative to encourage better insulation in houses will create high costs for landlords with older properties. Tenants can also demand these changes to reduce their bills, with landlords paying the price.
- Investment funds
Owning a property outright is not necessary when investing in this market. There are several property funds on offer, however these predominantly invest in commercial properties rather than residential accommodation. Although a number are now moving into the residential sector.
The TM Hearthstone UK Residential Property Fund invests in the buy-to-let industry and hopes to be a low-cost alternative. Another is Castle Trust’s Growth Housa, a method of linking gains to the Halifax house price index, as opposed to the FTSE 100. Both can be achieved through an ISA, discarding Income and Capital Gains Tax.