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Latest Property Blog for Leigh-on-Sea & beyond!
I am receiving more & more enquiries everyday from people interested in buying properties for investment. People seem to be fed up with their poor performing savings and with confidence in their banks being at an all time low, they are increasingly exploring alternative opportunities… and why wouldn’t they!?
Obviously, as an estate agent I believe everyone should be buying a property and renting it through me, but then I would say that wouldn’t I??? I have to say though, its reassuring to think that bankers have finally got a worse reputation than estate agents if that’s possible??
So, investing in property is all very well, but, what are the pitfalls? What tips and advice would I offer? What should you look for? Lets see if I can offer a little bit of assistance.
Firstly, I would ask that you consider what you really want from your investment? Clearly, properties can go up and down in value, but historically property, as a long term investment has out performed many others over the years. Timing however, is of the essence! Capital growth is great but many investors are more interested in supplementing their income.
My advice would vary completely depending on exactly what the client wants out of their investment and critically, when they are looking to realise it?! A typical small flat in the area, maybe student accommodation, may generate a brilliant yield every month and be cheap to buy in the first place, but may not be in a part of town that is going to see large price increases. Conversely, a seafront flat or house in Leigh may be more expensive to buy and not so great on a monthly return should you decide to rent it, but, it will potentially see greater growth and therefore a bigger return when finally realised. Obviously, a good return in monthly rent and an increase in capital value would be great but what would be more important given the choice?
Secondly, do you invest in freehold or leasehold property? Obviously your budget may dictate this decision for you, if your budget only extends to a small leasehold flat. However, if you take into consideration the extra charges, ground rent, managing agent charges and the length of the lease, then an entry level into the market is not always actually the cheapest. If the property is freehold then obviously you have full responsibility for the upkeep of the building, buildings insurance and ultimately more control of these expenses. When predicting yield and growth figures all of this should be taken into consideration.
The third thing to consider is what are your tax implications going to be? Obviously, any rent would need to be declared to the tax man and that could push you in to the next tax band, although the costs of maintaining the property will reduce this liability.
The last thing to consider is can you afford it if the worst were to happen? If you need a ‘buy to let’ mortgage to purchase the property, then the lender will look at you in terms of affordability, especially now with the new MMR regulations coming in to force earlier this year. The question is, would you be able to afford the property if it was empty for a prolonged period not earning you any rent? Can you afford to run your current home alongside an investment property if this was to happen?
Now, I may have scared you half to death and you won’t now touch an investment property with a barge pole after reading this, but, I think as long as you are looking for a long term investment and take into consideration everything it has, over many years, shown to be a great way to invest.
Phew, that was a bit heavy and professional, I promise dear reader I will get on to something a bit lighter and more fun next week.
And heres an insight into some 'fun' http://www.leigh-on-sea.com/blog/the-ice-bucket-challenge-leigh-on-sea.html
My colleagues reckon ill do anything for charity or a bit of attention!
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