We firmly believe that a well-managed and well-considered investment property is an essential element in any long-term financial plan and there is a huge weight of evidence to support this view. Property values fluctuate, sometimes quite dramatically, through the economic cycle and it’s critical that you are in control of your investment and do not have any pressure to sell. Here are a few tips;
The first rule of property in our view is that you should always view before you buy. In the boom years following 2001, an entire industry sprang up around off-plan sales. Thousands of investors bought at distance and on the basis of sometimes spurious and fanciful claims either about the quality of the apartment or building, or its proximity to well-known landmarks or proposed schemes. Don’t believe the website – visit the city in which you are thinking of buying, visit the site in which you are interested and then test the various marketing claims such as ‘a 5 minute walk to the station’ or ‘2 minutes from John Lewis’. Take a view as to the quality of the location and try and remain objective – schemes in areas which are being regenerated can be a little scary but it’s important to understand the wider plans for the neighbourhood. The web is a great tool in getting to know about a place, so jump online and research the city you are interested in and look at economic data, demographics, population predictions, property market surveys, retail rankings and hospitals, universities and schools. You’ll soon get a sense of whether this is a place worthy of investment.
The second rule is that there is always a reason why a property looks cheap. Some of these can be positive and genuine, others not so;
1.The property is repossessed and represents good value
2.The property is in a regeneration area where prospects look good but there is little current evidence to support higher values
3.The property is being marketed by an out of area agent who doesn’t know the market (this does happen)
4.The vendor is under pressure to sell
1.It’s in an area which has little demand and little prospect for growth
2.It’s got an intrinsic issue such as a defect in the title or structural issues, which can usually be resolved but can carry significant costs
3.It’s in a town or city with low employment and poor transport links
If you are preparing to rent out your own home, there are a few key pointers which will help to make the process much easier and which could actually dissuade you from doing so;
– However well-behaved, professional or considerate your tenant may be, they are unlikely to treat your home as their own. If you are particularly house-proud then you may find it difficult to rationalise this.
– If there are any items of furnishing or personal chattels which you are particularly attached to, take them with you. The principles of furnishing a rental property rather than your own home are entirely different.
– Make sure you advise your lender that you are preparing to let out your own home. They are likely to want to change the terms of your mortgage (i.e. charge you a higher interest rate) and will want to ensure that you can afford mortgage costs.
– Review your insurance, tell your insurer that you are considering renting out your home and look at specific policies to protect you. Rent guarantee insurance is readily available, well-priced and a tax-deductible item so it’s well worth considering.
– Research how to deal with the income from your rental – if you are not self-employed, you will probably need to use the self-assessment process. An accountant will be able to prepare a return for you but if you are organised and have reasonable admin skills, this is something you could do yourself. You can get some guidance here; https://www.gov.uk/renting-out-a-property/paying-tax
– Have an honest conversation with your partner (and/or yourself) as to whether you’ll be comfortable owning a property you don’t live in.
– Whilst you might be tempted to manage the property yourself, we would always recommend asking at least two reputable letting agencies to visit, value your property and set out their service standards. We would always recommend a large, established independent agent as a starting point- make sure they are members of ARLA, the TPO and a deposit registration scheme and make sure that they justify their valuation with local comparable evidence.