Choosing an investment property
- Is not a liquid or an investment gamble...it is a medium to long term investment.
- B2L residential property should take account of capital appreciation as well as rental yields.
- When purchasing an investment property, always ask yourself, "will this sell and be attractive for a new owner"? Consider the exit when you purchase.
- Go for areas where you know already that there is a good rental demand. You don't want economically inactive tenants.
- Location is important for tenants you are seeking. They want local facilities such as shops, schools, good transport links and a safe local environment.
- Investing in property is very different to buying a home for yourself. You are in business as a landlord to make money – not help people.
- The benefit of appointing an agent to manage your B2L property is significant, particularly if "things go wrong" with the tenant - breakdown of their relationship, behind with the monthly rent or just simply managing the upkeep of your asset on a day to day basis. The recruitment of new tenants and their vetting can be stressful unless you appoint an agent to work on your behalf.
- Having "peace of mind" is important, as well as ensuring you minimise any void periods between tenants, because you will most likely still be paying the Mortgage loan irrespective of occupancy.
Seek financial advice early
- The market is considerably different from the pre-recession boom.
- When setting about investing you must consider all the costs you might incur at the outset. These could include insurance, service charges, professional fees, fitout costs and dilapidations and repairs. Do not simply look at the rent and bank loan cost equation.
- Leveraging your money. If you have £120k do not buy just one property, buy two and put £60k down as deposit on each. Then obtain a mortgage to fund the balance - the rent should cover your outgoings.
Keeping the administration under control
- Make sure you start a simple book-keeping system to record all invoices throughout the year. These will consist of things like rental income, agent management fees, bank loan repayments, service charges, repairs and purchases. The council tax and utilities are your tenants responsibility.
- You are responsible for declaring all income generated from your B2L portfolio and this is best completed on your year-end return by your accountant.
Forget the moving blues, go Yellow.