The Ultimate Guide to Property Investment
CategoriesInvestor Advice

The Ultimate Guide to Property Investment

Track Capital has developed this detailed guide to teach you everything you need to know before embarking on your property investment journey.

Are You Ready to Invest In Property?

Before you can get into the nitty-gritty details of how and where to invest in property, you must first consider if you are ready to step into the world of property investment.

Property is unique, permitting investors to be as hands-on or hands-off as they wish to be. However, it will still undoubtedly require a large portion of your time, funds, and attention, especially in the early days.

Do You Have the Funds?

Whilst the amount of money required to invest in property will inevitably vary based on the type of property you hope to purchase, having a sufficient starting pot is essential to help you begin your property investment career.

£40,000 is a great starting point. Considering that a 25% deposit can purchase most buy-to-let homes with a 25% deposit, £40,000 will afford you a city centre apartment with solid potential for capital growth.

Those with a more substantial pot (between £100,000 and £200,000) will have more options. For example, they may choose to purchase a small portfolio of homes or a property in a more expensive area. Those with a larger than average investment budget may also opt for a more sophisticated investment strategy in the alternative market – an excellent way to diversify their portfolio.

However, this is not to say that property investment is impossible with less than £50,000. There are many ways to navigate the sector, and working with a dedicated property investment company will enable you to explore all your options.

Do You Have the Time?

Even with the most hands-off approach to property investment, it will still take up a significant portion of your time.

Some investors prefer the property development route, which will demand all of your attention, and realistically can rarely be worked around another full-time job. However, the lump sum financial payoffs can be huge.

At the opposite end of the spectrum is the traditional buy-to-let route. Here, many landlords choose to employ a management agency to oversee their properties, meaning the investment will only take a tiny portion of their time.

Using a company such as Track Capital can enable you to benefit from a complete hands-off model, with our experts taking care of all the operational aspects of your investment.

Do You Have the Skills?

No qualification, course or accreditation will immediately make you a great property investor. However, many personal skills and attributes are essential to succeeding in the sector.

Firstly, you must have to ability to think objectively. Unfortunately, many property investors become too emotionally attached to the homes they are contemplating, meaning they cannot make clever business moves. Communication skills are vital too, as you will be regularly dealing with developers, contractors and tenants.

Additionally, a genuine passion and interest in the industry are crucial, as property can become all-encompassing at times. Many investors find their excitement and confidence grows with every business decision, strengthening their enthusiasm for property over the years.

Teaming up with a property investment company can help remove the stress from these sometimes daunting decisions, especially crucial in the early stages of your career.

Why Choose Property?

The next step is to ensure that property is the suitable asset class for you.

There are many options for those with a sizeable investment pot, including but not limited to property, stocks, cryptocurrency and index funds.

So why choose property?

Security

Of course, it would be unwise to describe any investment as definitively ‘secure’. All markets are fluid and can be volatile occasionally, yet property in the UK has shown itself to be relatively stable.

This is because the demand for private rented housing in the UK is enormous. As of 2020, the number of privately rented homes in the UK hit 4.44 million. Yet, there is still a considerable housing shortage, with the government estimating over 300,000 homes need to be built yearly to bridge the gap between supply and demand.

The acquisition of first-time mortgages is now notoriously tricky. Meaning, many young professionals are happily accepting private rented accommodation over ownership, enjoying the flexibility this option offers.

House prices have steadily climbed over the past 30 years and even grew by 8.5% during 2020, which is staggering considering the economic impact of the coronavirus pandemic. Meaning, when the time comes to sell your home or release equity from it, the value increase is often significant.

Investors can make their assets more ‘secure’ by opting for traditional buy-to-let in well-performing areas. Conversely, those with a high-risk appetite might be drawn to buy-to-sell (property flipping), which is less secure but can offer incredible short term results, with investors expecting substantial returns within 6-18 months.

Leverage

One of the greatest draws to property investment is that the individual can secure leverage in the form of a mortgage.

Whilst a £200,000 investment in stocks might be out of your remit at this current time; a £200,000 property might not.

A 25% deposit plus stamp duty and legal fees will allow you to purchase a home of this value, gaining income in the form of a monthly rental charge and capital appreciation.

Flexibility

Many investors are drawn to property due to the flexibility it offers.

It allows you to be as hands-on or as hands-off as you wish.

The buy-to-let landlord is at one end of the scale, who wants to generate an entirely passive income. Investing in an off-plan property built to an excellent finish minimises the risk of any issues arising with the home.

Once the home is completed, the investor can then instruct a management agency to oversee the property. These agents will find and vet tenants, deal with the legal paperwork and be the first port of call for any queries. Meaning, as the landlord, you will only usually be contacted in cases of emergency.

Conversely, at the other end of the spectrum, we have the property developer. A property developer is someone who builds a home from the ground up, transforming a piece of land into a home with immense value.

Property development is a very hands-on investment style and is generally not possible alongside another full-time career. However, the joint venture model permits property development for those with stricter time constraints, often allowing them to balance the demands of a full-time job alongside.

Developers tend to have extensive experience in the field, as well as a network of contacts.

Calculating Your Budget

Obviously, the budget you require will hinge on several factors.

It entirely depends on the type of property you choose, your appetite for risk, and the timeframe in which you expect to begin to see returns.

Generally, people begin investing with a minimum budget of £40,000. This enables them to purchase a well-located off-plan home with a 25% deposit. With less than £40,000, buying a property that will generate substantial timely returns can be challenging, especially if you solely focus on the UK’s best-performing markets.

Those with higher budgets will be afforded a great deal more freedom, including the ability to purchase multiple units and secure greater discounts, as well as the option to invest in more premium markets.

Of course, there are many more expenses involved with property investment than the initial outlay for the building. These include but are not limited to:

Purchasing Costs

  • Legal Fees – the costs of the solicitors and conveyancing during the buying process. Surveys will likely also need to be carried out (and paid for) before completion.
  • Stamp Duty Land Tax – this is a tax on the property payable once you complete. The rate varies depending on the investor’s residency status and the value and type of asset. See a Stamp Duty calculator here.
  • Furniture Packs – in some cases, investors will need to arrange for the property to be furnished. These packages can cover everything required to set up a home, including sofas, beds and even electricals.
  • Mortgage Brokers / Remortgage Costs – you will likely use a mortgage to leverage your property investments. You will probably want to work with a dedicated broker to secure the best deals where this is the case.

Ownership Costs

  • Letting and Management Fees – if you plan to instruct a letting agent to oversee your property once completed, these will attract a monthly charge. Lettings agents tend to work on a sliding scale, ranging from those who merely acquire a tenant to those who deal with every aspect of the home.
  • Service Charges – this is a yearly cost to maintain the development’s communal areas, including stairwells, entranceways, and shared gardens.
  • Ground Rent – a minimal yearly fee payable to the freeholder by leaseholders.
  • Extra Charges – investors may also wish to consider insurance and a small maintenance budget for minor repairs throughout ownership.

Rental Yield v Capital Growth

Capital Growth

Capital growth (also known as capital appreciation) is the value that the property will increase over your period of ownership.

In 1996, the average property in London cost £77,000. In 2021, the same home will set you back over £488,000. This 633% increase is astonishing considering the relatively small 25-year window.

The average trajectory shows that over time, property prices rise. However, they are known to dip in the short term, indicating that capital growth cannot always be relied on for those with immediate goals.

Rental Yield

On the other hand, rental yield is a crucial metric for those who invest in buy-to-let property.

It considers the amount it costs to run the property (mortgage, insurance etc.) and the monthly rent the property attracts. It is then presented in a percentage format, which generally indicates how successful the rental property is. Anything above 5% is considered an excellent rental yield.

Yields in London tend to be substantially lower than the rest of the UK, as the housing prices are significantly higher.

So, Which Is More Important?

Again, this will depend on your personal situation and goals.

Focusing on building strong capital growth is more important in the early stages of your investment career.

The home’s value will increase throughout ownership, meaning you will be able to withdraw equity from the property in a much shorter time frame. This money can then be reinvested into other properties, meaning capital growth is the best way to build your portfolio.

Strong rental yield is a focus for those who are investing to supplement their primary career, building an entirely passive secondary income stream.

A combination of two will lead to the best long-term results. This will allow you to generate an additional monthly income whilst accumulating wealth to help build your portfolio.

Taxes and Legal Implications

For new landlords, ensuring they are paying the correct level of tax can cause a massive headache.

Stamp Duty Tax

This is the first tax that springs to mind when most consider buying a property in the UK.

The stamp duty rules have changed significantly following the budgets in 2020. As a result, homebuyers have greater flexibility, with the government keen to incentivise a bounce-back in the housing market.

As of the 1st October 2021, the rules will again regulate. Meaning stamp duty tax is payable in bands, depending on how much the home is worth.

£0-£125,000 = 0%

£125,001-£250,000 = 2%

£250,001-£925,000 = 5%

£925,000-£1,500,000 = 10%

£1,500,000+ = 12%

Please be aware that these figures relate to England and vary slightly when purchasing in Scotland or Wales.

There are various ways to pay stamp duty, and some lenders are happy to add this tax to the mortgage balance to be paid alongside your monthly instalments.

Please note the rates will also vary for non-resident investors, with an additional surcharge of 2% applied.

Income Tax

Income tax is the tax we all pay on our earnings, regardless of whether we are paid by an employer or are self-employed.

The amount of income tax you pay on your rental property will depend entirely on the profits you are generating and your circumstances. Therefore, it is always best to speak with an accountant who will advise on the records you need to keep and the amounts you should be paying.

Capital Gains Tax

Capital gains tax is the tax that you pay when you sell an asset.

Meaning, when you come to sell your property, the tax will be payable on the profits you have generated. This will be a serious consideration for those hoping to liquidise their assets in retirement.

The percentage of Capital Gains Tax depends on the amount of profit generated from the property. It is also worth noting that some investment classes (such as Purpose-Built Student Accommodation) are exempt from Capital Gains Tax and Stamp Duty Land Tax.

Limited Company

There are considerable benefits to property investors working under a limited company rather than personal ownership.

Over 80% of UK buy-to-let mortgage applications were made in limited company names last year, illustrating how popular this structuring is.

There are substantial tax benefits, including the ability to deduct your entire mortgage interest from your UK tax bill and the fact that you will be taxed at corporation rates rather than income tax rates.  Additionally, when you sell the property, you will pay significantly less in Capital Gains Tax.

Moreover, extracting money from the property at a limited company is much more straightforward. Dividends, owner loans, and pension contributions become options, meaning you can withdraw money from the investment in the most tax-efficient way.

However, perhaps the most significant benefit to a limited company formation is protecting your personal assets. The limited liability means that the risk associated with the investment is much lower, often permitting individuals to make bolder property decisions.

Seek Professional Advice

Whether you own one property or ten, we would always advise that you speak with an accountant to ensure your taxes are appropriately registered.

Working with an accountant can save you a significant amount of money, as they will be able to provide you with the most cost-effective solutions to structure your business.

Tax is often an afterthought for many landlords but can become a nightmare if left to fester in the background for too long.

Choosing An Asset Class

This is the most significant decision for every property investor.

Residential Buy-To-Let

Residential buy-to-let is the most common choice for property investors.

It is arguably the most straightforward option, making it ideal for those at the start of their property career.

This method is where a landlord purchases a home to be rented to tenants. These tenants then pay a monthly charge to live in the property, and the investor can keep the profits.

The landlord then generates an income by way of both rental yield and capital appreciation.

This is debatably one of the ‘safest’ investing methods, with tenants usually signing a 12-month tenancy agreement before moving into the home. Some landlords chose to work with managing agents to look after the property, whereas others prefer to maximise their profits and deal with the tenants personally.

However, there are also more advanced buy-to-let strategies, such as Serviced Accommodation. This can be an excellent way to benefit from the residential market whilst driving up rental yields.

Commercial Buy-To-Let

Commercial buy-to-let works in a similar way to residential but are favourable amongst many investors.

Commercial property takes many forms, with office and studio space being the most common.

Landlords often choose commercial property as tenants tend to take significantly longer leases. Therefore, once an occupant is acquired, landlords can rest assured their income is secure for the following 24 months.

However, many investors discover that mortgages or alternative funding can be more challenging to secure for commercial properties. Additionally, obtaining great tenants can take substantially longer than for residential homes, and investors often find that the capital growth is typically less aggressive than in the residential sector.

Purpose-Built Student Accommodation

Student properties offer a great opportunity for investors. With over two million individuals enrolled in universities across the UK, the demand for this asset class is astronomical.

The requirements have evolved over the recent years, with students now willing to pay more for high-quality accommodation. The UK also welcomes nearly half a million overseas students each year, demanding excellent, centrally located housing.

Student lets are favourable amongst investors as they are typically much less expensive to purchase than standard rentals. This decrease in price combined with the high demands leads to robust rental yields on this asset type.

Purpose-built student accommodation allows investors to secure assured rental periods, higher than average yields, and attractive tax exemptions.

Houses In Multiple Occupation (HMO)

A HMO is a property where every bedroom is rented separately.

They can be highly lucrative for investors and reportedly offer three times the rental yields than standard buy-to-let.

They are prevalent in London, with the rental market outpricing many young professionals. However, HMO’s are not purely in the capital. They are also popular in cities such as Liverpool, Manchester and Sheffield, with tenants opting for this way of living for various reasons.

However, there are many logistical issues associated with HMO’s.

Firstly, it can be challenging to secure a mortgage against the property, as lenders treat these homes differently from standard buy-to-lets. Additionally, many other regulations are associated with this style of home, mainly linked to health and safety. Moreover, these properties can be much more time consuming due to a higher turnover of tenants.

Finally, those interested in HMOs should note that the landlord covers the costs of utility bills, so council tax, electricity and water should all be factored into the monthly budgets for the investment.

Residential Buy-To-Sell (Property Flipping)

As the name suggests, residential buy-to-sell is where an investor purchases a home, improves the property and sells within a short timeframe.

This is an excellent option for those with knowledge and expertise in the home renovation sector or close connections with those who do.

The buy-to-sell route generally requires an investor to be very hands-on, making decisions and being present throughout the process.

Investors considering the buy-to-sell route should be aware that market dips are always a possibility. Meaning, individuals sometimes have to hold onto the property for slightly longer than they initially imagined or risk making a loss on the investment.

Property Development

Property development appeals to those who have extensive expertise, knowledge, and connections in the building industry.

A great way to enter the property development market is to focus on refurbishments or joint ventures, building partnerships with those more experienced.

Development involves purchasing a site or existing home and then building out properties from the ground up or converting existing structures.

Some developers will look to exit and sell the properties as soon as possible to ensure a profit. Other developers will operate a build-to-rent strategy, which involves retaining ownership and benefiting from monthly income and future growth.

Alternatively, commercial property development can generate extremely generous profits in the right areas, with companies willing to pay high amounts for the perfect premises.

Choosing A Location

Once you have decided on the asset class that suits your taste, you must settle on a location.

Working with a dedicated property investment company removes the limitations of this second home being nearby. Many investors purchase properties throughout the country and across the globe without ever even visiting the home.

Your goals, chosen asset class, and risk appetite will ultimately determine the location you choose.

For example, those with a high budget but a low appetite for risk may choose a buy-to-let in London. Whilst the initial outlay is high, the demand for private rented accommodation in the capital is astronomical.

Conversely, those with a lower budget but a larger risk appetite may choose a buy-to-sell in a less expensive northern city, such as Sheffield or Leeds. This will then generate a lump sum profit that can be reinvested into further developments.

Our top tips for choosing the ideal rental location are:

  • Choose a city currently undergoing regeneration. This means new businesses and occupants will be drawn to the town, keeping the demand for housing high. Manchester and Liverpool are prime examples.
  • Consider your target market. Two and three-bedroom properties will attract families, so ensuring great schools are nearby is a must.
  • If in doubt, choose a university city. Opting for a city like Manchester or Birmingham with a bustling student population is a great way to secure your investment. The demand for student properties will be huge, as well as high-quality accommodation for new graduates.

Go Off-Plan

An off-plan property is a home that is purchased directly from the developer before it is completed.

Developers are often willing to sell these properties at heavily discounted rates due to the early purchase.

The opportunity for capital growth here is staggering, best explained by way of an example.

The price of a home is £150,000.

However, due to the off-plan purchase, you secure the home for a 15% discount at £135,000.

But, the home isn’t complete for another year.

During this time, the price of the property has grown by 4%.  Meaning, the property is now worth £156,000.

£21,000 more than your paid for it.

At this point, some investors with short-term strategies choose to sell the property immediately. Others will instead rent out the home, making the most of the monthly rental yield and the continued capital appreciation.

Investors can also secure rental assurances and incentives such as free furniture packs and legal fee contributions by purchasing during the construction period.

Maximise The Potential of Every Investment

The hard work doesn’t stop once you have chosen to invest in a buy-to-let property. Now it’s time to consider how you can get the maximum value from that home.

Think about your chosen target market and what appeals most to them.

City centre apartments are generally filled with young professionals. This demographic tends to be willing to pay more for higher quality, great looking fixtures and fittings. Although bathrooms and kitchens are expensive to replace, upgrading these rooms can dramatically increase your rental yield.

Whereas suburban properties are usually filled with young families. So, for these rentals, you must appeal to those with children. This might involve spending some money and time creating a lovely garden.

Keeping any property in generally great condition will increase the rental value. Replacing carpets, curtains, and white goods will show that you care for the home and encourage tenants to treat it with the same level of respect.

Additionally, consider adding additional clauses into the agreement which increase the rental value. This may include allowing pets in the home or permitting tenants to redecorate to their tastes. These are also great techniques to encourage reliable tenants to renew.

Build A Property Investment Plan

To be successful in property investment, you must build a business plan.

Randomly choosing homes and projects that do not align with your goals can make the investment journey extremely stressful. Therefore, you must create a plan that will help you reach your targets successfully.

Whilst it might sound slightly strange, it is easier to develop a business plan by first considering your exit strategy. Thinking about your end goal will help you create smaller and more achievable targets.

For example, your goal may be to have three tenanted and mortgage-free properties by the time you retire. These will then continue to generate a passive income and can be passed onto your family members.

Otherwise, you may be property investing to fund your retirement. This means you will be planning to sell all, or most of the property around the age of 65, generating a healthy savings pot to enjoy in retirement.

Working with a dedicated investment company can help you implement the stepping stones to reach your more substantial final goals.

Property Investment Recap

  • Investing at the right time is critical to success. This means when you are financially ready and when you have enough time to commit.
  • There are many other ways you could choose to invest your savings pot. However, property is favourable due to the flexibility and security it offers. Property also has the unique advantage of securing leverage.
  • There are many different asset classes involved in property—these range from the traditional buy-to-let method to commercial rentals and property developments.
  • Some investors choose to focus on capital growth, whereas others are more concerned with rental yield. The best strategies carefully balance both.
  • Ensuring you are aware of the legal implications and taxes payable is essential to ensure you can accurately calculate your property income.
  • Purchasing the home is not the end of the journey. You must ensure you maximise the home’s potential.
  • Creating a thorough business plan is the only way to meet your long term goals successfully.

    For more specialist advice, contact Track Capital at [email protected]

Investor Advice
CategoriesInvestor Advice

How to Invest 100k in Property

Anyone considering investing in the UK property market with an initial sum of £100,000 is in a very favourable position. £100,000 offers you a tremendous amount of flexibility and choice. You may choose to invest in a single premium home, multiple less expensive properties, or even consider minor development projects.

Why Choose Property?

£100,000 is a substantial sum of money. Therefore, you must be sure that property is a suitable investment for you. One of the most significant benefits of choosing property is the option of securing leverage. For example, a £100,000 investment could act as a mortgage deposit towards a much more expensive home. This home can then be renovated and sold to generate a lump sum profit or rented to secure a passive monthly income. Moreover, property is considered a very safe investment. Between 2007 and 2017, the number of households occupying the private rented sector grew an incredible 2.8 million (63%). Interestingly, in the same period, the number of properties bought with a mortgage fell from 9.8 million to 8.3 million. Space in the UK is finite, and that has never been more apparent than in our city centres. The capital growth opportunity is enormous, with the demand for luxury city centre apartments continually rising. Additionally, property offers flexibility. You can choose to be as hands-on or hands-off as you like. Many investors love to be in the thick of it, dealing with their tenants personally. Conversely, other investors thrive with a completely passive approach, hiring management to oversee their portfolio.

Consider Your Goals

Before putting a £100k investment plan in place, you must consider your personal goals. This includes evaluating both your long- and short-term targets. We recommend starting with your long-term goal. This should be your ‘why’ into property investment. For example, your aim might be to build a £500,00 retirement pot by the age of 65. If you are currently 45 years of age, you quickly understand that you have 20 years to turn your current £100,000 pot into the half a million you are working towards. From here, you can develop short-term goals to help achieve your long-term solution. This may include purchasing two smaller homes with your initial payment of £100,000, concentrating on properties that generate decent yields but with a clear focus on capital growth. Then, after three years, withdraw the equity from the homes and use it for a deposit on another property. Repeat the process over the following decade. Alternatively, property development or regeneration can be a faster way to produce large sums of money for those with evident expertise. These profits can then be reinvested to create a passive income. Whist the long-term goal will undoubtedly stay with you throughout your property career, your short-term targets should remain fluid. Changing markets mean that remaining adaptable will keep you in the best possible position.

What Is Your Risk Appetite?

This is perhaps the most critical question that every investor needs to ask themselves at the beginning of their journey. There is no shame in the desire to secure safe, sound investments, even if that means returning a slightly lower profit than high-risk alternatives. Many investors find that their risk appetite grows as their experience does. Thus, as your knowledge of the industry grows alongside your financial freedom, you might find yourself in a position willing to take on higher risk projects. Those with a higher appetite for risk might choose the buy-to-sell option, which can offer excellent short-term profits.

The Best Location for 100k Buy to Let

Less expensive cities such as Liverpool were generally reserved for those will smaller initial investment pots. However, the various regeneration projects and the growth of the excellent universities are encouraging investors here from around the world. The lower price tag of some of these homes doesn’t necessarily mean they are a worse investment. Conversely, although some would consider them slightly more ‘high risk’, there are incredible rental yields to be earned from this lower-cost housing. Northern cities such as Manchester or Liverpool are an excellent option for those hoping to purchase more than one home with their initial investment pot.

Premium Investment Locations

However, £100,000 offers the opportunity to invest in premium locations with higher price tags. London is the most obvious premium location and is generally the most sought-after area for investors concentrating on buy to let. Last year, the average house price in London was £674,491. The average flat in the city costs £542,215, and the typical sale price of a terraced house was £740,592. The enormous initial payment for a property in London means that the rental yields can be significantly smaller than those in more affordable cities. The average rent in London for new tenancies currently stands at £1,572 per month, after falling significantly due to the challenges associated with the pandemic. However, rents are expected to rise again steadily, as normality resumes in the capital. Capital growth in London is astronomical. The house prices continue to grow every year, even considering challenges in the housing market. This means your home will continue to appreciate in value throughout your period of ownership. With a staggering amount of tenants searching for a home in the capital, London offers tremendous opportunities for both annual rental yields and capital growth. Those looking to diversify should be aware that the demand for excellent quality student accommodation is also very high in London, with over 40 higher education institutions across the city.

100K Allows for Bulk Buying

Developers are keen to incentivise investors to purchase more than one home at once. A £100k budget is a significant balance that could attract serious discounts for bulk buying, dramatically increasing your return on investment. There are two main options where bulk buying is concerned. The first is to purchase a small portfolio that the already operational. This is an excellent option for those looking for a hands-off investment. This portfolio might include two or even three small properties currently tenanted, and therefore already making a profit. It means that the properties will pretty much cater for themselves over the following years. After a set period, you may then decide to extract the equity and purchase another property. Again, diversification is vital here, and it would be wise to consider purpose-built student accommodation or a House in Multiple Occupation. Alternatively, developers often offer significant discounts for bulk purchases of off-plan property. This would mean purchasing multiple apartments in the same tower block before the building is completed. This can be a great way to attract substantial capital growth, accumulating multiple homes before their completion. However, the passive rental income would not be immediately available in the way it would be when purchasing an already operational portfolio.

£100k Investment Summary

  • £100k is a substantial deposit to begin your property development career, and there is a range of strategies you could adopt.
  • Carefully considering your short-term and long-term goals and your risk appetite is essential before beginning any property development journey.
  • £100k offers the opportunity to explore more premium locations, such as London. Although they might not provide the most robust rental yields, the capital growth can be enormous.
  • This budget presents the option of bulk buying. This could involve purchasing an already operational portfolio or bulk buying multiple off-plan homes directly from a developer.

You can view our range of property investment options for all budgets here.
Please contact the team via [email protected] with any questions.

CategoriesInvestor Advice

How to Create a Property Investment Plan

Why You Need a Property Investment Strategy

Every property investment company will tell you that the only way to succeed in this sector is to have a robust investment plan in place. A property investment plan is integral throughout every stage of your investment career. From your very first purchase to your exit strategy, your investment plan will keep you on the right path to making the most lucrative property decisions.

What Is a Property Investment Plan?

A property investment plan is essentially a business strategy for those who specialise in property. There is no correct way to build a property investment plan. It entirely depends on your needs and budget. Your property investment plan will also vary significantly depending on how ‘hands-on’ your investment style is. An investment strategy means that you will consider potential properties armed with thorough research, allowing you to make the safest moves possible. A solid approach will also allow you to make projections and forecasts, enabling you to build and diversify your portfolio.

What Do You Want to Achieve as a Property Investor?

A property investment strategy considers three very crucial factors.

The first is your current situation. This will include your budget, any other assets in your portfolio, and your current career commitments.

The second element of your strategy will then focus on your targets. What do you want to achieve? Some investors aim to achieve an additional passive income to supplement their main career. Others are looking to ditch the day job and build a property empire.

Crucially, the third component involves researching and planning how your journey will take you from point A to point B. Your strategy will consider the time frame and funds you have available, as well as your risk appetite.

Buy To Let vs Buy To Sell

Most property investment strategies fall into one of two categories. The first is buy to let, where a property is bought to be rented to tenants. These properties generate a monthly income, as well as an appreciation in value throughout ownership.

The second of these categories is buy to sell. These are generally untenanted properties that are purchased and then sold on to generate a lump sum profit. Investors with renovation expertise often favour this method, capitalising on below-average properties in lucrative areas.

Superficially, these two categories appear straightforward. However, there are many nuances where property investment is concerned.

Residential Buy to Let

Residential buy to let is probably what springs to mind when most think of property investing. It is where an individual purchases a home and rents to tenants, who pay monthly.

This is generally where most investors begin their journey, as buy to let mortgages can be acquired to fund the project. These loans typically require a 25% deposit. Those who favour the buy to let process but are looking for something a little more specialised may consider a House in Multiple Occupation (HMO). Here, individual rooms in a property are rented out to different tenants. These generally attract a much higher monthly income but also require significantly more administration.

Alternatively, buy to let landlords may consider student property. The student population in the UK grows tremendously every year, meaning the pool of potential tenants is continually increasing. Additionally, the demands of students are evolving, with more now preferring to pay higher rents for better quality accommodation.

Commercial Buy to Let

Commercial buy to let is where an individual will purchase a property to rent to a business owner to use as their premises. These commercial lets may include offices, studios or retail spaces.

A considerable advantage of commercial buy to let is that tenants tend to take significantly longer leases than a residential alternative. Many companies deem a constantly changing address to be bad for business. However, the downsides include the fact that financing can prove slightly more tricky, and many report that it takes much longer to find a genuine tenant to occupy the space.

Buy to Sell (Property Flipping)

Buy to sell is excellent for those who have connections in the world of renovation. As the name suggests, this method of investing is where a home is purchased and resold in a short timeframe, generating a profit.

One of the most significant benefits of this method is that it provides a lump sum payment that can be used to reinvest very quickly. Additionally, the stress of dealing with tenants or managing agents is entirely removed.

There are plenty of improvements that can be made to a building to increase its value. Some choose to give homes a quick and inexpensive facelift, which can often add a surprising amount to the property’s overall worth. Others prefer to remodel and renovate the home completely. Adding extensions, loft conversions and redesigning gardens will all help add a tremendous amount of value.

Another trick many investors use is to apply for planning permission on the home. Applying for planning permission can be a confusing and laborious task, and many families will pay a premium to purchase a home with planning permission already in place.

Property Development

This is where an investor will develop a brand-new home for the sole purpose of selling it on or renting it out. This investment strategy requires the most amount of expertise. It is also arguably the highest risk of them all. Blowing the budget on the build or becoming too emotionally attached to the project can be catastrophic.

Building Your Portfolio – Executing the Plan

Building your portfolio can seem like a distant dream when you are embarking on your property investment journey. However, reinvesting your equity is the fastest way to build a portfolio and reach those long-term goals. Working with an investment company can enable you to grow your portfolio much faster, using their knowledge and connections to help implement your business strategy.

There is certainly a sweet spot involved with withdrawing equity from properties, allowing you to reap the rewards of capital growth whilst still enjoying a monthly rental income. For off-plan homes, many property investors choose to take money from the properties around the three-year mark. But this can vary dramatically depending on personal circumstances.

Mistakes to Avoid

Property investment can sometimes feel like a minefield. There is so much misinformation online; meaning investors are often drawn to unwise decisions.

Neglecting Off-Plan Homes

Off-plan homes are properties that are purchased before completion. They attract a much lower price tag as developers offer significant discounts for secure, early purchases. A massive benefit to off-plan property is the capital growth potential during the build process. In addition, these properties often offer solid rental yields as they tend to be city centre, high quality, serviced homes.

Expecting Returns Too Quickly

Property is a long game. It takes vast amounts of planning, perseverance and patience to be successful in this industry. Investors are prone to becoming frustrated, resulting in rash, reckless decisions.

Failing to Plan an Exit Strategy

Many investors lose the ‘why’ in their journey. You likely have a very specific goal. This may be to accumulate a certain amount of wealth by retirement, at which point you will sell up and drift into the sunset, enjoying the fruits of your labour. If this is your goal, choosing city centre apartments where limited land is available is the best choice. Where demand outweighs supply, the properties grow in value quickly. Although the rental yield may not be quite as high, the capital growth accumulated by retirement will be staggering. Lower cost suburban housing is the best option for those who want to earn a steady monthly income and pass property onto their family. These often have less potential for capital growth but higher rental yields due to their low initial cost.

Going it Alone

Property investment is not a solitary career path. You will require advice, guidance and friendship along the way. Working with an investment company can give you the best access to incredible off-plan homes. Making friends with other local investors is also a fantastic way to gain insight into the industry.

Failing to Diversify

Every investor will have a preferred asset class. Many investors are drawn to residential buy to lets. Steady capital growth and strong yields in many cities offer an excellent opportunity for landlords. However, diversifying your assets is the safest option and the best way to create a robust portfolio. It can also help build resilience against market dips.

Becoming Emotionally Attached

Property is unlike many other investment types, as it is undeniably personal. You are providing a service to your tenants. Be those businesses setting their base in commercial property, families relocating to residential lets, or eager students moving into purpose-built accommodation.

Successful property investment involves choosing homes with the best potential rather than emotional or aesthetic attachments to your personal preferences. Properties should always align with your goals, strategy, and budget. Working in partnership with a dedicated investment company can help remove the emotional attachment and enable you to make the most sensible decisions.

Property Investment Plan Recap

  • A property investment strategy is a business plan specifically for those who specialise in property.
  • To develop the most robust investment plan, you must consider your personal long-term and short term goals, as well as your risk appetite.
  • Nearly all property investment falls into one of two categories: buy to sell, or buy to let.
  • There is a range of mistakes all investors must avoid. These include failing to diversify, becoming emotionally attached to the homes, and neglecting an exit plan.
How to Invest 200k in Property
CategoriesInvestor Advice

How to Invest 200k in Property

£200,000 is a significant pot of money and is an excellent starting point for those looking to enter the field of property investment. Of course, no single online guide will be able to tell you exactly how to utilise this £200,000. However, we aim to provide you with all the knowledge to make the most sensible decision considering your personal circumstances. Two incredible opportunities will be discussed in-depth in this guide: Property Development and Joint Ventures. Whilst there are many other property investment opportunities, these are great for those with a higher-than-average initial investment pot.

Consider Your Personal Goals

Every investor should begin their property journey by asking themselves the same question. ‘What are my goals?’ We recommend that every individual makes both short-term and long-term targets. For example, a short-term goal might be to own three properties within the next five years. Once you have established this target, you can build a strategy that will help you reach it. Conversely, a long-term goal could be to have accumulated £500,000 by retirement. Then, with an already significant £200,000 starting point, you can implement a plan to build the remaining £300,000.

Contemplate Your Risk Appetite

Your goals must be considered in line with your risk appetite when deciding how best to invest £200,000. Those with a low appetite for risk may have to reconsider the timeline for their short-term goals to set realistic expectations from the off. However, £200,000 is a substantial sum of money that places investors in a highly favourable position. This is because you can choose to diversify your assets from the very beginning. For example, £100,000 could be put towards two low-risk buy to let properties. City centre, off-plan homes that will attract young professionals willing to pay high rental prices would be a great place to start. The other £100,000 could then be used for a slightly more risky buy to sell property. Ideal for those with renovation expertise, buy to sell investments offer quick lump sum profits. Market downturns and availability can attach risk to this investment type, but an ideal option for someone with a big enough initial budget to spread.

Property Development and Refurbishments

Those with a larger than average investment pot may want to consider property development or refurbishment rather than the traditional buy to let method. These terms should not be used interchangeably, as there is a significant difference between the two investment types. Property development is generally reserved for those with expertise in the sector. Here, an investor will develop a piece of land to raise its value, which usually includes building a single home, or multiple properties. However, for land in the right area, developing commercial premises can be highly profitable. On the other hand, property refurbishment is where an investor will purchase a home and make structural and cosmetic changes to increase the property’s value. Once complete, the investor can then either rent to tenants or sell on for a quick profit. Both of these options are great strategies for building and diversifying your portfolio. The profits generated from refurbishments or developments can then be immediately invested into high yield rental properties with excellent potential for capital growth. We would always recommend diversifying at this point. For example, you may choose to invest in a city centre apartment, a purpose-built student let, and a House in Multiple Occupation (HMO). There are, however, more substantial risks associated with property refurbishment and redevelopment, especially in comparison to the more ‘safe’ buy to let option. So, it can be hugely beneficial for those new to investment to partner with someone who has experience in the field.

Joint Ventures

A joint venture is where two parties purchase a single property or portfolio of homes together. It offers an opportunity to pool resources together, splitting the profits. Joint ventures work exceptionally well where one party has expertise and connections, and the other has the funds to finance the plan. With a 200k investment, a joint venture could provide an extremely lucrative option as it may allow you to work with someone who has the knowledge and contacts in the building industry. Depending on your long-term goals, this may permit you to purchase a portfolio of rental properties to generate a monthly yield, or a group of buy to sell homes, quickly creating a lump sum profit.

Advantages of Joint Venture

Expertise

Two brains will always be better than one. So, combining the knowledge and experience of two parties can help to ensure savvy business decisions.

Cost Saving

Moving into a joint venture on a 50/50 split means that although you will only reap 50% of the profits, you only have to stump up 50% of the costs. This applies to the initial outlay of deposits and fees but is also relevant for renovation costs and ongoing expenses such as services charges.

Joint Ventures Present Opportunity

Pooling resources from two parties undoubtedly opens doors for property investors. For example, it means you may be able to take on larger properties, bulk buy homes, or invest in properties in premium locations. Often, the opportunities which require significantly more capital can also create the most profit.

Significantly Increased Returns

Instead of purchasing the 2, or 3 homes that your 200k investment will afford, a joint venture could allow you to buy a small portfolio with a partner. Bulk buying homes often means that your return on investment will be substantially higher.

Disadvantages of Joint Venture

Unequal Involvement

From the very outset, investors should be aware that no joint venture is perfectly 50/50. On the contrary, the beauty of this investment method is that each individual can strengthen the other’s weaknesses.

Differing Expectations

The most common reason joint ventures fail is that each party has different expectations. This can then lead to communication breakdowns and serious business problems. Differing expectations is the number one reason why all plans and documentation should be thoroughly discussed and understood before embarking on the joint venture journey.

Tips for Joint Ventures

Always Have an Exit Strategy

The nature of these business relationships means that individuals often have different short and long term goals. Therefore, exit strategies for both parties need to be abundantly clear from the start. This will provide a simple way out for each party and can prevent things from turning nasty.

Legally Compliant

Even for those heading into a joint venture with someone they trust entirely, ensuring your arrangement is legally watertight is imperative. This will help in the event either party would like to leave the business relationship or if you decide to liquidise the assets at a later date.

Other Options

Although developments, refurbishments and joint ventures present excellent options for those with a £200,000 investment pot, they are not the only choices. For example, you could choose to purchase a home in a more premium location. Houses in London are substantially more than the national average, meaning the monthly rental yields are generally below the rest of the country. However, the capital growth is astronomical. For someone with a low appetite for risk and a large initial pot, purchasing a London property could be a great option. Conversely, bulk purchases of buy to let homes could offer an excellent solution for investors who want a completely hands-off approach. Developers are keen to provide significant discounts for those bulk buying off-plan properties. Opt for city centre, in-demand apartments and hire a management team to oversee them. While the profits may not be as substantial as some more high-risk options, the income is generally passive and very secure.

£200k Property Investment Recap

  • £200,000 is a fantastic initial investment pot, which allows for immediate diversification.
  • Before beginning any property investment journey, you should carefully consider your personal goals and appetite for risk.
  • Property development or refurbishment are excellent options for those who have expertise in the area, and prefer lump sum profit over passive income.
  • Joint ventures are an excellent solution for those with a significant initial investment pot, allowing you to partner with another, and gain a much higher return on your investment.

You can view our range of property investment options for all budgets here.
Please contact the team via [email protected] with any questions.

CategoriesInvestor Advice

How To Invest £50,000 In Property

With an abundance of information online, it is hugely challenging for new investors to know where to begin. This article will take you through how to get your first step into the world of property investment and exactly how to invest your £50,000 lump sum.

We actually discussed this topic in a recent podcast. Spotify users can listen to the podcast using the audio below, or alternatively, check out the episode on our Anchor page to find links for other streaming platforms.

In the podcast, our directors, Nick and Tobi, discuss how to invest £50,000 in property. You’ll learn about the best way to turn your money into a growing property portfolio, with clear and comprehensive explanations of the strategy to employ, factors to consider, and potential financial gains. However, for users not able to listen to our podcast or for those who prefer a written version, please read on.

So, why £50,000?

From our conversations with new clients, £50,000 appears to be the average amount an investor has when they begin their property journey. This is an excellent starting point because £50,000 is a large enough sum to allow a new landlord to begin a lucrative investment journey.

Although individuals can certainly break into the property market with less, this balance will afford the luxury of a property with a high rental yield and strong capital growth.

Why property?

Naturally, any smart investor will consider all of the available investment options before delving into the world of property. For example, a lump sum of £50,000 could be placed into stocks or cryptocurrency. However, there are many reasons why we believe property reigns supreme over these alternatives.

Firstly, the purchase of a property can be leveraged using a mortgage. Meaning, to purchase a £100,000 investment property, an individual may only actually need a £25,000 cash deposit. The remaining balance can come from a mortgage loan. Whilst mortgages undoubtedly attract their own distinct risks, they allow for much more substantial investments, which would not be possible in other sectors.

Secondly, property is reliable. Like any asset, there are fluctuations when the data is considered on a granular scale, but historically the property market has shown a gradual, consistent upward trend. One reason for this is that land is finite, so as space becomes more limited, the price progressively increases.

Additionally, there is comprehensive, robust data and analytics surrounding property. The information is transparent and accessible, meaning every investor can make accurate and well-researched predictions about their investment potential.

Finally, property provides multiple opportunities, making it a diverse option for the fluctuating UK economy. The most common choice is the buy-to-let mortgage, where an investor will purchase a home to let to a tenant, providing a regular monthly income. Alternatively, an investor may choose to sell the home, generating a lump sum payment. There are many other options for property, including investing in commercial property or short-term holiday lets.

How to invest £50,000 in property?

So now we understand why £50,000 is a good starting sum, and why property is an excellent choice for your investment, let’s consider the best strategy for investing your £50k into the property market.

Step 1: Opt For Off-Plan Property

A city centre, off-plan property is the best place for any investor to begin. An off-plan home is one that is purchased before it is built.

Developers are willing to offer discounted rates for these purchases, as they offer an immense amount of security. Aside from a reduced cost, opting for an off-plan home gives the investor an element of choice. Dealing with the developer at this early stage will allow investors to choose the most lucrative apartment.

This might be because it is south facing, has a particularly large balcony, or comes complete with a parking space. These added features allow landlords to charge a premium with regard to both rent and resale price.

Step 2: Seek The Perfect Location

With a limited pot of money, choosing the right location is essential. We believe Liverpool or Manchester provide the ideal option, as investors can comfortably purchase a home in either city for around £150,000. This figure will afford any landlord a centrally located apartment with tremendous rental potential.

Choosing a city undergoing regeneration is crucial, as it shows the area is on an upwards trajectory. Therefore, the resale value will continue to increase, along with the demand for high-quality rental properties.

Step 3: Research The Location’s Capital Growth & Rental Yield

Rental yield refers to the profit made from a rental property over a year. It is presented in a percentage format, and carefully balances the value paid for the home against the yearly sum it generates. Many investors aim for a yield between 5% – 8%.

Notably, rental yields are substantially lower in London, due to the astronomical cost of housing. Conversely, capital growth refers to the increase in property value through the period of ownership. Investors will closely follow these trends to allow them to understand whether it is an appropriate time to sell.

Earlier in this article, we recommended the cities of Manchester and Liverpool. Investors could choose a cheaper city such as Bradford or Hull, where they may even be able to secure two properties with an initial investment of £50,000. It may even be the case that the yields are higher in these cities due to the lower cost of housing. However, capital growth will be limited, and therefore growing equity in the homes will be extremely slow. Building equity allows investors to withdraw money from the home, purchase more property, and diversify their assets.

So, investing in properties and areas with strong capital growth is the only way to build a strong portfolio.

Step 4: Work With A Property Investment Company

Property investment companies have access to properties that the general public does not. Most off-plan homes are not marketed through websites such as Rightmove or Zoopla.

Instead, developers often choose to only partner with property investment companies, who they can rely on to provide high quality, reliable landlords. Investment companies work hard to cultivate these relationships, with each party providing a service the other requires. Therefore, by working with an investment company, you will access the latest off-plan homes that you would not otherwise have even been aware of.

Secondly, investment companies have strong negotiation power. Due to the stream of regular buyers they introduce, developers are often willing to provide the homes at heavily discounted prices. Without the backing of an investment company, individuals will struggle to achieve the same discounts. As well as these heavily discounted prices, investment companies can negotiate bonuses such as stamp duty contributions and furniture packages.

Finally, the expertise in both property and locations are priceless. Especially for investors who do not live in the same city or country, working with a dedicated team will ensure you invest your capital wisely.

An example of this strategy in action

Let’s consider how the £50,000 investment will realistically play out, and how this can lead to growing your property portfolio further.

As a property investment company, we can often secure a discount of more than 10% on off-plan properties purchased directly from an investor. For the purposes of this explanation, a conservative estimate of a 10% discount will be used.

Consider a city centre apartment valued at £150,000, which is more than reasonable for a city such as Manchester or Liverpool. We would be able to secure this property for £135,000. A 30% deposit for the home (again, conservative) amounts to £40,500. This leaves you with £9,500 to cover legal costs, stamp duty and any decoration or furniture package you would like to include in the property.

Now, let’s look at the capital growth of the home. Consider that it takes one year from the home’s purchase to completion, then you rent the property out to tenants for another two years. Savills have predicted a 27.3% growth in property values in Liverpool over the next five years. Again, using a more moderate estimate, we will consider the annual increase to be 4%. Meaning, over the 3 years, the property’s value will increase by 12%. Therefore, by year 3 the property will be worth £168,000.

So, a home purchased for £135,000 is now worth £168,000, meaning you now have £33,000 worth of equity in the property. Additionally, two years of rental income will be generated passive income during this period.

Building a Robust Portfolio

Most landlords choose a buy-to-let property to begin their investment journey. The steady monthly rental provides them with an additional income, whilst the property appreciates in value in the background. Once they have gained enough equity in the home, they can then withdraw and inject it into a new property, growing their portfolio with relatively little work.

Considering the above example, the £33,000 equity could be withdrawn and used for a deposit on a smaller home. We work closely with investors to ensure they choose a second investment home that complements their first, cleverly diversifying their portfolio. And so, by using this method of leveraging finance, investing and then re-investing the profits, a property investor with just £50,000 at the start can build a burgeoning property portfolio in a relatively short period of time.

£50,000 Investment Recap

  • £50,000 is a great starting point for investors, allowing them to purchase a centrally located apartment attractive to renters using their budget as the deposit for a mortgage.
  • A central off-plan property in a city undergoing regeneration, such as Manchester or Liverpool, is the wisest investment.
  • Although rental yield is important, the growth of a property’s value will allow for the fastest portfolio growth.
  • Working with a property investment company will allow for discounted rates and access to properties not advertised online. Use this to your advantage to secure the best possible deal and maximise your returns.
  • As your initial property appreciates in value, use the equity earned as the deposit for your next buy-to-let investment. Then, keep repeating this method to continue growing your portfolio over time.

For more advice, contact Track Capital at [email protected].

CategoriesInvestor Advice

Manchester: A Property Market Forecast For 2021/2022

Manchester was recently named the best city in the UK to be a landlord by Go Compare, sparking worldwide interest.

With an average rental yield of 5.55% and property prices well below the national average, it is no surprise that this city continues to cement itself as an investors favourite.

Manchester is an integral element of the Northern Powerhouse. The entirety of the North West region sees continual growth every year, with businesses flocking to the area. In March 2021, rent prices in the region were reported to be 6.8% higher than 12 months prior.

Savills have predicted that rent prices will grow 17% by 2025 in Manchester, showing the lucrative returns available in the booming city. Plus, there are over 200 lettings and management agencies across Manchester, highlighting the astronomical size of the rental market in the city.

In this post, we’ll explore what’s at the heart of Manchester’s property market growth, and we’ll look at the forecasts for 2021 and beyond.

Pulls to Manchester

The Greater Manchester region is popular for several reasons. Incredibly, between 2006 and 2016, the population grew by 7.7%, which was twice as much as the rest of the UK.

Manchester is a hugely diverse city, with over 200 different languages spoken. 40% of adults in the region can speak at least two languages, meaning individuals from all over the globe feel immediately at home. Following the uncertainty of Brexit, Manchester continues to draw foreigners from the continent and beyond.

Furthermore, Manchester is a forward-thinking city with an impressive arts scene and bustling nightlife. And positively, the region has pledged to be carbon neutral by 2038.

A Huge Regeneration Project

The Northern Powerhouse is a term that is unavoidable when discussing investment in the UK.

The idea was introduced in 2014 by the Chancellor of the Exchequer, George Osborne. Created with a promise to build excellent links between the booming northern cities and increase spending, drawing businesses away from London.

For too long, northern cities felt left behind the soaring economy in London. However, Manchester is now clearly leading the way in this gigantic venture.

There are countless regeneration projects currently ongoing in Manchester. Two of the most prominent are Manchester Waters and NOMA.

Manchester Waters covers a whopping 26 acres and is a decade long project to provide 2,500 new homes. This area will not only look fantastic but will be sure to lure residents from far and wide, situated just a 10-minute walk from Manchester United’s Old Trafford football ground.

NOMA is another large project, which will proudly boast over one million square foot of new homes. Ideally located directly opposite Victoria train station, the development will also house 200,000 square feet of hotel space for the thriving tourism market. Additionally, the area will be home to 2.5 million square feet of office space, perfect for the flourishing corporate scene.

Fluctuations Across the City

According to Zoopla, the average price paid for a home in Manchester in the last 12 months was £219,610. When looking only at detached properties, the price rises to £335,522. Conversely, for flats, the rate falls to £165,953.

Greater Manchester is home to 2.8 million people. Naturally, there are considerable fluctuations in property valuations across the region. For example, Bolton sits at the lower end of the spectrum, with homes selling for £152,000 on average. Conversely, in the city centre, the average asking price is substantially higher at £260,909.

Three of the most popular areas in the city for investors are the city centre itself, Salford, and Fallowfield, popular with students.

Considering the rental figures, 2020 reports show the average rent for a 1-bed property in the city centre sits at £758 per month, and for a 3-bed property, this rises to £1,368. Rightmove and Zoopla reports show that Manchester was the most searched city outside of London in the same year. This trajectory is showing no sign of slowing.

Stamp Duty Holiday

2020 brought the most turbulent year many will see in a lifetime. Remarkably, throughout this chaos, UK house prices grew by an average of 7.3%. This is staggering, considering the economy contracted by -10%. This tremendous growth is primarily attributed to the stamp duty holiday.

Stamp duty is a tax paid on most property purchased in England and Northern Ireland. Homes over the value of £125,000 attract the charge, which is payable on a sliding scale. Stamp duty can range anywhere between 2% – 12% of the homes value, depending on the price of the property.

However, as a response to the economic downturn of the coronavirus pandemic, the government introduced the stamp duty holiday. This has encouraged the purchase of property across the country, a necessary adjustment under these extraordinary circumstances.

The stamp duty holiday raises the threshold of properties that attract the tax to £500,000 and was initially in place until 31st March 2021. Due to huge demand, the holiday has been extended until 30th June 2021. This means, if your property completes before 30th June, and costs less than £500,000, no stamp duty tax will be payable.

From 30th June, the threshold will be reduced to £250,000. This ruling will stay in place until the end of September, when standard regulations will resume, and stamp duty will be payable on all homes over £125,000.

Manchester’s Student Market

Manchester is home to over 100,000 students across its five higher education establishments, making it one of the biggest student hubs across Europe.

High tuition fees are constantly reinvested into the city, evident from the incredible infrastructure around Manchester. Additionally, students are keen to spend their money in local businesses, a key factor for a flourishing city centre.

People relocate from all over the country, and the world, to study at Manchester’s prestigious universities. This vast amount of highly skilled students transition effortlessly into the high-profile businesses in the city.

Manchester refuses to stand still. The constant development means that the city attracts global businesses. Unilever, Amazon, and the BBC have all cemented themselves in Manchester, offering outstanding natural career progression for graduates. Interestingly, Manchester has one of the highest student retention rates, with over 50% of people who study in the city choosing to base themselves there after graduation.

For investors, this offers a highly lucrative opportunity. These graduates are looking for centrally located, high-quality accommodation which will suit their newly employed needs.

How 2020 Affected Manchester

Unsurprisingly, rental costs dipped at the start of the Coronavirus pandemic, with the housing market almost grinding to a halt. The market was too turbulent for many investors, with tenants struggling to hit monthly rental costs due to job losses.

However, following this initial downturn, the Manchester market saw massive growth. Between January and December 2020, house prices in the region increased by a staggering 9%. Comparatively, prices in London rose just 3.77% throughout the year.

Manchester Property Market Forecast For 2021 And Beyond

There are exciting predictions for Manchester in the following years. When looking at the UK more broadly, Birmingham and Manchester are leading the way.

House prices are predicted to grow nearly 18% in Manchester by 2025, and although there are always risks attached, Manchester appears a safe bet in the eyes of many investors.

Risks Associated with Investment in 2021

Of course, no investment comes without risk, and property is no exception to this rule.

2020 showed us that anything is possible. Manchester had an incredible bounce-back considering the downturn at the start of the year, but investors learned a stark lesson about being savvy with their property.

There are two clear ways in which property investors can help mitigate losses.

Firstly, work with a dedicated property investment company, such as Track Capital. Investment companies have expertise in the sector and can carefully match investors with suitable properties. Additionally, investment companies have a range of properties in their portfolios and may expose landlords to new asset classes they had not previously considered.

Be it commercial property, purpose-built student accommodation, or off-plan homes; an investment company will help you make the wisest decision.

Secondly, every investor must diversify their portfolio. There should be diversification with regards to both location and asset style. Varying your investments means that your portfolio will be able to withstand fluctuations in the market.

Manchester Market Recap

  • The population of Greater Manchester is close to three million, meaning there is tremendous scope for rental investments in the area.
  • Students are an enormous driving force behind the booming Manchester economy, with the region offering one of the biggest student hubs across Europe.
  • The vast regeneration projects across the city have drawn massive businesses to the area, which help boost the student retention rate.
  • The stamp duty holiday ends in September 2021, with investors urged to complete their transactions before this date.
  • As with any investment, there are significant risks attached. The best ways to mitigate these risks are to work with a dedicated property investment company and continually diversify your assets.
  • With house prices predicted to continue to soar, there has never been a better time to invest in the city.

For more advice, contact Track Capital at [email protected].

CategoriesInvestor Advice

How Do I Start Investing in Property?

Following the trends set out on the continent, the UK is quickly becoming a nation of renters. From families looking for long-term rentals to students in search of high-quality purpose-built accommodation, the demand for rented property is massive.

There is also a huge market for rented commercial premises, with many businesses on the hunt for central-based offices.

After seeing these vast gaps in the market and the lucrative returns they can generate, many investors are turning their hands to property.

What is Property Investment?

Property investment is the process of purchasing a residential home or commercial premises with the sole purpose of generating an income.

In most cases, the investor will never live in the property.

Instead, they will buy the property to rent to tenants. This will generate a monthly profit, providing the investor with an additional and often lucrative income.

Many choose to work with tailored investment companies. A property investment company will generally have a bank of well-researched assets and will help to link the individual with the investment best suited to their circumstances.

Additionally, property investment companies can help you find legal representation and they’ll provide after-sales support.

Types of Property Investment

There are several ways in which a beginner can break into the property market in the UK. The options will depend entirely on the amount of capital you have to begin your journey and how ‘hands-on’ you intend to be throughout the process.

Buy-to-let is the most common form of property investment in the UK. As the name suggests, an investor will purchase a residential or commercial property and lease it to tenants who will pay a monthly rental fee.

This is considered the least risky option. Providing the area is well researched, the property should generate a healthy, regular income. However, those new to investing should be aware that buy-to-let is considered a long-term strategy, and therefore unsuitable for those looking to make immediate returns.

On the other hand, many investors choose the buy-to-sell option, giving much faster returns. However, this option requires a very hands-on approach and is considered to have slightly more risk attached. Drops in the market where a quick turnaround is needed can cause the landlord to lose money on the property.

An alternative type of property investment comes in the form of a Real Estate Investment Trust (REIT). This allows individuals to buy into property investment companies that are listed on official stock exchanges.

In these circumstances, the money is pooled together to invest in various forms of property. The income is paid to the investors in the form of dividends. REIT’s can be a great way to diversify investment income, but again are only suitable for those who are content with a long-term strategy.

Is Property A Good Investment?

Of course, it is impossible to say whether anything is a ‘good’ investment.

However, buy-to-let properties regularly provide a stable income for investors.

Commercial properties commonly take a little longer to find a suitable tenant, yet the tenancy periods on these buildings are usually significantly longer. Whereas tenants for residential homes are commonly much easier to find, yet tenancies will likely be substantially shorter.

Once tenants are in the property and a management company is appointed, there is very little the investor needs to do. The investment will happily tick along in the background, allowing you to focus on other tasks.

Most landlords aim for yields of between 5-8% for residential homes, with more sizable gains currently available in the north compared to the more expensive London properties. For those looking for long-term returns, property is considered an extremely worthwhile investment.

Investment Type Property Cryptocurrency Stocks
Pros o   Mortgages are available – meaning more significant investments are possible.

o   Is it a stable, long term investment, that is considered relatively low risk.

o   Property can attract unique tax benefits, especially for those looking for a stable requirement income.

o   There is a consistent, long term increase in property prices across the UK.

o   Potential for very high, fast returns.

o   Allows for rapid diversification as investors can choose many different cryptocurrencies.

o   Cryptocurrency is easy to liquidise, meaning you can easily access the funds.

o   It is very straightforward. Investing in stocks can be done instantly through smartphone apps.

o   Easy to sell, so investments can be quickly liquidised.

Cons o   It can be difficult to diversify without large cash injections.

o   Fast returns are not generally possible with property investment.

o   It can be slow to liquidise the assets.

o   Highly volatile, meaning there is potential for huge losses.

o   No official regulation, so open to a range of illegal activity.

o   Many are still unsure how cryptocurrency will play out on a global scale.

o   So much mixed information online makes stock investment challenging for those without expertise.

o   Very time consuming as thorough investigation is needed before investing.

o   The stock market can be extremely volatile.

How To Start Investing In Property

1. Consider The Risks Associated with Property Investment

There are, of course, risks associated with the property, as with any other type of investment. It’s therefore sensible to consider (and plan for) these risks before starting your investment journey.

For those interested in buy-to-sell, dips in the market can mean the profit is considerably less than expected. Alternatively, it may force investors to hold onto properties for longer than they initially intended.

Conversely, for buy-to-let, investors should be aware that every property will attract void periods occasionally. During these times, mortgage repayments still need to be paid, as well as base payments for utility bills.

Another risk associated with property investment is the fact that money will become tied up in the asset. Whilst property is an excellent way to boost your income, the money input becomes wholly inaccessible. For those that might require immediate liquidation, property may not be the most sensible option.

The best way to protect yourself against potential risks is to diversify your portfolio. Working with a range of asset styles in a variety of locations means that you will be less vulnerable to market fluctuations.

2. Decide What Type of Investor You Are

There are many options available to those who wish to invest in property. The asset class will depend entirely on what the individual hopes to gain from the investment.

Most property investors fall into one of three groups.

  • Those looking for a new career path.
    • These investors will generally be searching for hands-on investment opportunities with the scope to develop their knowledge and expertise. Investors looking for a new career path may be drawn to buy-to-sell homes and property development opportunities.
  • Those looking for a primary income source.
    • This applies to investors who are not yet ready to give up their current career. Buy-to-let will be most applicable for these investors, in either the residential or commercial sector. Working with a management company to oversee the daily running of the property allows the investor to take a back seat, yet reap the rewards.
  • Those looking for an extra income source.
    • This is usually best for those new to the sector. Starting with a small second property or a REIT investment can give individuals the stepping stone and confidence to build their portfolios.

3. Evaluate Your Budget

Once you have decided what kind of investor you want to be, you must generate the funds to make a purchase. This means you need to consider how much money you have available for investing. The answer can dictate your investment strategy.

Normally, rental properties are purchased with a cash payment or using a buy-to-let mortgage. This way, the investor has complete control regarding how much they pay for the property and the monthly rental charge they request.

There are, however, substantial costs associated with this. Buy-to-let mortgages typically require a 25% deposit, and most second homes will attract stamp duty charges.

Hence, some investors on lower budgets look towards alternative methods of investment, including REITs.

These give new landlords a step into the investment world without such a considerable transfer of capital. However, with this initial smaller output, the return will undoubtedly be significantly less.

How Much Do I Need To Begin Investing?

Of course, this question depends on a vast range of factors. However, we appreciate that those looking to invest require concrete numbers.

Although it can be done with less, Track Capital believes that £50,000 will provide investors with a healthy sum to take their first step.

Basing this on a 25% deposit, £50,000 will allow the purchase of a £200,000 property. Off-plan, city-centre homes are the best place to start.

Off-plan investing allows you to buy at a much better base price, as you are purchasing directly from the developer. This value will afford you a quality two-bed property in a high-performing city such as Manchester or Liverpool, attractive to tenants and great for capital growth.

As well as better cost prices, buying off-plan allows you more choice, which means you will be able to choose the home with the best view, or benefits such as a balcony and parking.

Once equity has been acquired in the home, it can be removed and recycled into new properties, which is an excellent way to build a robust portfolio.

4. Gradually Build Your Portfolio & Use A Management Company

Investing wisely in property takes time, patience, and expertise.

Whilst it is tempting to take an “all guns blazing” approach, you should slowly and cautiously build your property portfolio. Investors should continuously diversify where possible, meaning they invest in different asset classes and locations.

This is where investment companies shine. These dedicated businesses allow you to invest in new cities without ever even visiting. They can help landlords to buy in new areas of a country, confident the location is well researched and offers strong yields.

Once a property is purchased, the importance of a strong management company cannot be overstated. They will deal with sourcing tenants, conducting background checks, and dealing with any ongoing maintenance issues. This frees up your time to focus elsewhere, instead of dealing with the day-to-day property management.

5. Consider Your Goals And Exit Strategies

When building a portfolio, it is crucial to do so with the end goal in the forefront of your mind. Consider what your ultimate aim is. This may be to provide a sustainable retirement income or to build a portfolio that can be easily liquidated in the future.

Knowing your goals will help you to make sensible property decisions.

In Summary

  • There are many ways to invest in property in the UK, with buy-to-let being the most popular method.
  • Property is considered a strong investment, but as with any asset, there are risks attached.
  • Before beginning a property investment journey, the individual must assess their circumstances and consider what investment style they want to be involved with.
  • Build your portfolio cautiously, always focusing on your end goal.

For more advice, contact Track Capital at [email protected].

CategoriesInvestor Advice

What Is A Good Rental Yield In The UK?

Whether you are a first-time landlord or an experienced investor, calculating rental yields is a crucial factor in determining the success of a property.

Property offers a lucrative investment opportunity to generate a regular income with a relatively ‘hands-off’ approach. However, ensuring the rental charge carefully balances against the outgoings associated with the property is crucial.

There are two primary forms of income produced from a rental property. The first is the annual rental charge, which is generally paid monthly. The second income comes in the form of capital growth, which refers to the increase in value the property attracts throughout ownership.

What Is Rental Yield?

Quite simply, rental yield is the amount of income that you can expect to receive from a single property in a standard year. The rental yield is one core metric of which the financial success of a property can be measured against. It is displayed in a percentage format.

Why is Rental Yield Important?

Rental yield is the most accurate representation of how financially strong your investment property is.

The housing market can be highly volatile, and predicting what a home will be worth in ten or twenty years is nearly impossible. Therefore, investors choose to focus their calculations on the rental yield rather than the appreciation of the home’s value.

Rental yields allow the owner to balance the price of the home with the annual income it creates.

Properties in London are known to attract six times the monthly rent of those in the north, which initially draws investors from far and wide. However, upon further investigation, when factoring in the increased price of the home and the other costs associated with being in the capital, the profit can often be very weak.

How to Calculate Rental Yield?

Calculating the rental yield of a property is very straightforward.

Simply divide the property value by the annual rent income and times it by 100.

Imagine the monthly rent is £700, and the property is worth £250,000.

So, the annual rent income will be £8400. £8400 ÷ £250,000 is 0.0335. Multiply this figure by 100, and the rental yield of the property is 3.36%.

However, investors must understand the differences between gross and net rental yield. The figure quoted above uses very crude numbers to develop the gross rental yield percentage. A net rental yield considers the other costs associated with the property, such as mortgage repayments and insurance premiums.

To calculate the net yield, the annual costs for the home must be subtracted from the rent income. This figure can then be divided by the value of the property and multiplied by 100, to give the net figure.

As an example, consider the same annual rental income, £8400.

However, you may have £250 worth of costs associated with the home each month, amounting to £3000 per year.

So, £8400 – £3000 = £5400.

£5400 ÷ £250,000 = 0.0216. Multiply this figure by 100 to give a net rental yield of 2.16%.

Net rental yield is a much more accurate figure for investors to consider, carefully balancing the costs of the property with the income it delivers.

What Is A Good Rental Yield?

Most investors aim for a rental yield that sits somewhere between 5%-8%.

Anything around the 7% mark will be considered a ‘good’ rental yield.

The expected rental yield depends entirely on the style of property. Studio flats attract very lucrative profits, as the initial outlay will be substantially less. The highest of all gross yields are found in the single rooms rented as part of a House in Multiple Occupation. However, they will undoubtedly also attract much higher management and agency fees due to the regular changes in tenancy.

One-bedroom apartments produce higher yields than semi-detached or detached homes. However, these larger properties generally entice tenants with longevity, reducing the risk of the property sitting empty, and eliminating the costs associated with regular tenant changes.

Any property generating a yield of less than 4% will be considered to have been overvalued at the point of sale.

How to Increase Rental Yield

Of course, the simplest way to increase the rental yield is to lower the current outgoings.

Regularly changing insurance suppliers and monitoring your mortgage plan is the easiest way to reduce the overheads of a property. Different deals and tariffs are introduced monthly, so contacting a mortgage broker for a new quote can save hundreds of pounds across any given year.

Be sure to also shop around for landlord insurance, which could deliver a substantial annual saving. Additionally, consider your management or letting agency fees. Whilst the importance of good quality management cannot be overstated, for loyal landlords, there may be some room for negotiation in your annual charges.

Secondly, refurbishing or converting the property can drastically increase the monthly income. Spending money on a rental home will always be a delicate balancing act but can often be the key to boosting the annual yield.

Whilst replacing kitchens and bathrooms is a significant single outgoing, a fresh, modern suite in either of these rooms will undoubtedly allow you to place your property at a more premium price point.

Thirdly, be flexible. The UK is becoming a nation of renters, which means tenants are looking for properties that offer longevity. Getting the first step on the property ladder has never been more challenging, so many families are looking for rental properties that they can grow into. Offering flexibility regarding alterations or pets allows the owner to increase the monthly rent and attract genuine, high-quality tenants to the home.

What About Capital Growth?

Aside from rental yield, capital growth offers a secondary form of income for investors.

Sometimes referred to as capital appreciation, it describes how the home’s value will increase throughout ownership.

The property market can be turbulent, so predicting capital growth figures can be highly challenging. However, it provides a significant source of income for property investors in the UK.

What Is The Average Rental Yield Tn The UK?

As would be expected, rental yields fluctuate hugely throughout the country, with various postcodes in the north often attracting the best results. For this reason, there is no set average across the UK.

For example, central Nottingham postcodes provide some of the most outstanding yields, reaching up to 12%. Whereas many London areas struggle to reach 5%, showing the dramatic impact house prices can have on the profitability of a home.

Rental Yields on Student Properties

With over 2 million students in full-time education in the UK, the growth of purpose-built student accommodation has been staggering. Recently, the expectations of students have increased dramatically. Those studying in the UK now expect upmarket properties in central locations and are willing to pay a premium for them.

Purpose-built student accommodation in Birmingham and Leeds is known to attract yields of 6.5% and 6.4%, respectively, showing the money to be made from this sector.

Some investors are deterred from this asset class due to the high turnover of tenants it requires. However, the shortfall of beds in nearly every university city means this investment style is generally a relatively safe bet. With a competent and reliable management company, your student let should generate a healthy income annually, with a relatively hands-off approach.

Notably, the university accommodation attracting the lowest rental yields are located in London, with housing surrounding the Imperial College sitting on average at just 1.7%.

Rental Yield Recap

  • A rental yield above 5% is a great ballpark figure for investors to aim for, with anything above 7% considered excellent.
  • Whilst student lets and Houses in Multiple Occupation generate the highest yields; they can also attract the most administration.
  • Net rental yield is a much more accurate figure than gross rental yield, and there are many ways a landlord can reduce their overheads to increase this annual percentage.

For more advice, contact Track Capital at [email protected].

CategoriesInvestor Advice

4 Reasons To Invest In Liverpool Property

Liverpool is considered one of the best places in the UK for property investment. The city is vibrant, with an eclectic mix of students and professionals complementing the diverse and rich culture.

Totally Money included 6 Liverpool postcodes in their list of the ‘top 25 UK postcodes to invest in a buy-to-let mortgage’. House prices in Liverpool sit well below the market average, yet rental incomes remain high. It is no wonder businesses and investors choose this area in the north over many more expensive properties in the south.

Liverpool has cemented itself as a core city in the northern powerhouse, with excellent train links connecting the area. Additionally, the long-awaited completion of the HS2 high-speed rail network means that the journey from Liverpool to London will take just 94 minutes.

The spotlight on the north is continuing to shine, with many businesses and investors choosing lower cost homes with stronger yields.

In this post, we’ll look at why you should consider investing in Liverpool property.

4 Reasons To Invest In Liverpool’s Property Market

1. A Revived and Thriving City

In 2008 Liverpool was awarded the city of culture. Since then, through various regeneration schemes, the city has been transformed. From shopping centres to sports stadiums and even the dock itself. Liverpool has been given a new lease of life which has seen a plethora new residents flocking to the area.

Not only did this regeneration spark a boom in tourism, but businesses saw the vast opportunities in the city. Large firms began building bases in Liverpool, appreciating the exceptional transport links and the city’s industrial heritage.

This means that demand for property in the city has skyrocketed, particularly high-end, centrally based accommodation.

2. Successful Student Community

Liverpool is home to four universities that attract students from around the globe.

Whilst most students opt for university halls in their first year, they are demanding high quality, functional and central locations for their final years, and they are willing to pay a premium for it.

This demand for student accommodation is set to rise in the coming years, with the local universities becoming increasingly popular. Private rental properties are needed to make up the shortfall of beds in student accommodation.

Houses in Multiple Occupation are often investors favourites, which are perfect for the ever-growing student population.

3. A Booming Business Area

This flourishing student city provides the perfect stream of fresh graduates every year to complement the local businesses.

Liverpool beautifully and effortlessly manages to blend a thriving scene of start-up companies with established businesses that have been household names for decades.

For those looking to invest in local residential or commercial property, the options are endless in Liverpool.

4. A Luxury Lifestyle

Liverpool offers its residents a luxury lifestyle that many other cities outside of London struggle to match. It is popular with students, young professionals, and families alike, willing to pay a premium to live in such a vibrant and exciting city.

It is a lively city packed with galleries, museums and, of course, the iconic waterfront.

The city draws tourists from around the world, all eager to experience the legendary nightlife. From the famous Beatles trail to the bustling underground music scene, there is a night out for everyone to enjoy in the city. Aside from the iconic music venues, Liverpool is football crazy, with tourists from all around the globe visiting the stadiums every year.

Reach out to the team at Track Capital to discuss our Liverpool property investments.

 

CategoriesInvestor Advice Tips & Tricks

The Benefits of Remote Property Investment

Remote property investment is on the rise.

It offers the freedom to invest anywhere in the world, from the comfort of your own home.

Remote property investment provides investors with the freedom to rapidly build their portfolio with a range of properties in different locations, and at various price points.

What Does it Mean to Invest Remotely?

Property investors no longer want, or need, to physically visit properties.

Not all real estate markets are created equal. So, knowing that you can easily invest in property in other cities, countries, or even continents means that investors can reap the rewards without having to commit to the regular travel that traditional investment required.

Remote property investors generally work with a local property investment company. This local company will typically have a portfolio of properties and will be able to connect the buyer with local lawyers and currency exchange services.

Working remotely takes the stresses away from investing. It makes the process much faster, allowing investors to reap their rewards much more quickly.

Remote Investments Allows You to Diversify

Investing remotely means that the world is quite literally your oyster. It allows you to overcome geographic limitations and diversify your portfolio.

Investors can tap into up-and-coming markets with exceptionally high rental yields, regardless of where in the world they are based. Sticking close to home can be risky, as one market crash and your whole portfolio could be in trouble.

For those with a particular passion for commercial property, the market close to home may simply not be broad enough, and remote investment allows you to expand your portfolio without the commitment of regular travel.

Allows for Differences in Risk Appetites

Working remotely allows investors to navigate regional economic downturns, using the power of local investment companies to build in areas that are currently flourishing.

Of course, there are risks associated with every investment, and real estate is no exception to this. Yet, every investor will inevitably have a different appetite for risk. For those who want something more secure than their local area can offer, remote investment provides the solution.

Keeps Things Strictly Business

Remote property investment ensures no emotional connection is developed between investor and property.

This makes it much easier to make intelligent financial decisions, allowing investors to expand their assets.

Speeds Up the Whole Process

Working with a dedicated property investment company means that you have access to the best assets in a range of locations, as well as knowledge of the latest off-plan builds. This means decisions can be made quickly, and sales are generally completed in a much more timely manner.

Property investment should provide you with a passive income, and working remotely allows for a completely hands-off approach. Many investors favour this method, especially when trying to scale their businesses.

For Commercial and Residential

There appears to be a myth that remote property investment is only for those looking to invest in commercial property. Whilst the commercial market is popular, remote working is ideal for every asset class.

Every property investor knows the value of Houses in Multiple Occupation, and student lets. Remote investing allows you to scale rapidly, using an investment company as an inside track into the thriving student markets.

How Track Capital Can Help

Successful remote property investment centres on surrounding yourself with a strong team.

Track Capital is a transparent and passionate property investment company based in the UK. We pride ourselves on finding the best possible investments for our clients, providing a bespoke service to ensure properties align with their investors.

We are also proud to offer comprehensive after-sales support, a crucial element to ensuring smooth remote property investments.

The best part: we do not charge our investors a penny.

To find out more today, contact Track Capital on +44(0)203 627 3987 or [email protected].

 

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