Property Investment
CategoriesInvestor Advice

5 Ways To Save Money On Your Next Property Investment

Introduction

Below we have revealed several tricks and tips that property investors can use to save money on their next purchase. In this case, we are not assessing the asset class or overall property investment strategy, it’s more for once you have a specific development that you’re happy with, now it’s just a case of achieving a slightly improved deal ensuring your funds are working as much as possible for you.
 
The points below are based on our experience of UK developers/vendors, investment agents and the parties involved in the transaction, so different rules would apply to purchases on the secondary market. Some of the below points may be obvious, but I can assure you the majority of investors don’t use them to their advantage.
 
So, read on for 5 ways to save money on your next property investment deal, remember saving money here and there could drive up your yield a percentage or two for the first year making it far more attractive and turn it into a market leading investment.
 
1. Solicitors/Mortgage Brokers
 

In most cases when investment agents such as ourselves, work with developers and third parties to structure deals and bring them to market, a lot of thought is given to make the full experience as convenient as possible for investors, particularly as most property investors are time poor and many are based outside of the UK or travelling frequently. Therefore, with most developments on the market, there will be a ‘recommended’ solicitor who will act for the majority of buyers, and potentially the same for mortgage brokers.

Whilst it will often save time and be more efficient to use the contract-ready companies, you are always entitled to use your own contacts. Therefore, if you wish to shop around and find a cheaper legal representative to process the transaction or use a mortgage broker that will charge a lower fee or even secure you a better interest rate, then it could save you hundreds of pounds from the outset. It seems obvious but most buyers don’t do this, you should weigh up if you’ve got the time to make a few calls in return for a cash saving.

 
2. Discounts
 
The UK housing market is in great need of new stock; therefore, developers are building to meet this demand which provides property investors with a wide range of options and means the agents/developers face plenty of competition. As a result, in most cases, the offer the investment agent presents to you from the outset will typically be the lowest rate they can secure from the developer. However, in some situations, it is possible to secure a discount but to be successful in doing so, you need to incentivise the developer/agent to give you one. You can do this in a few ways such as the following:
 
– Explain you’re able to progress the transaction quickly, completing the legal process and moving to the completion stage promptly
– Tell the agent you can pay the reservation fee the same day if you can secure a discount
– Complete the reservation agreement immediately to show you’re committed
– If you have anyone within your network that may be interested in property investments then, with their permission, provide the details to the agent
 
Completing the above in a genuine manner and being transparent with the agent/developer will put you in the best position to secure a discount, hopefully creating a win-win scenario.
 
3. Management Options
 
When it comes to property investment, property management is an essential aspect of the ongoing ownership which can save you money or cost you money, it can also be the difference between owning a property that’s stress-free or a complete headache.
 
You can shop around for letting and property management companies that are cheaper than the one quoted in the brochure, it may only be a small difference but over the course of a few years it soon adds up. This comes with a warning though, tread carefully because a good management company should have access to reliable contractors who are good value, so although the management fee may be good value, it isn’t always the most important factor. Also, consider ‘let only’ or different management packages if you’re in a position to do so, it doesn’t always have to be the fully managed package.
 
4. Agent Bonus – Cashback
 
If you have a good relationship with your agent, even if you haven’t invested before and they know you’re a genuine buyer reviewing options, it is sometimes possible to secure cash incentives for moving forward with a purchase immediately.
 
This is typically in the form of cashback and will be paid once the business in question has received the fee from the client e.g. the developer, once the purchase is complete. This can range from a couple of hundred to thousands of pounds. It isn’t always possible and will depend on the product in question but it’s always worth asking.
 
From personal experience, I know how investment agencies recruit in the UK, often they look for confident young members of the team to work hard calling investors, so be sure the person you’re dealing with has the authority to authorise such incentives.
 

5. Furniture Packs

Like the other points, recommended furniture pack providers are typically marketed in the development brochure for residential properties. Whilst, as with most options they are typically competitive, again sourcing your own can save a few hundred pounds. So, take the time to do a quick online search and find relevant providers who will supply and install furniture in your new property.

Summary

You can see from the above that it is relatively easy to shave a few thousand off your property investment purchase if you are willing to invest a little more time. Even if time and convenience are paramount for you, hopefully, one or two of the points should still be relevant. Any agent worth their sort will be able to work with you to maximise your returns. 

Get in touch with any enquiries or simply tell us what you’re looking for in your next property investment – locations, completion date, budget, asset class, yield etc. Not sure exactly what to invest in? View the pros and cons of each asset class here or get in touch to discuss what strategy would be best suited to your personal objectives.

Buy property
CategoriesInvestor Advice

Brexit – Buy property now or wait?

With the rollercoaster that is Brexit being at the forefront of our UK headlines for the past couple of years, but accelerated in recent months, it is affecting numerous markets around the world, property investment is one of them – to a certain extent.
Since the referendum, domestic investors have been saying ‘oh I want to wait to see what’s happening with Brexit’,  ‘I’m going to wait and see that everything is ok with Brexit’, ‘what are your thoughts on Brexit’ and so on..it has undoubtedly affected the sentiment in the market for UK investors in particular, not so much overseas investors who are less exposed to the media headlines and will analyse the market performance in terms of data. 
However, experienced and sophisticated investors understand that now is one of the best times to invest in property. Yes, despite the news headlines, now is the best time to invest in property. Having said that, it doesn’t mean you should blindly go into any development or location, obviously you should conduct the normal level of due diligence, however, if you have the funds, find the right deal and do the research, now is a fantastic time to invest in the UK market.
Let me tell you why…
 
Developers at the moment are keeping prices attractive and offering incentives such as free legal fees, stamp duty paid on premium units and free furniture packs, many agents are also offering improved returns and cash-back incentives, all in an effort to encourage investment.
 
As soon as confidence picks up and everyone rushes back in the market, developers will increase prices and there will be a lack of incentives available, it’s a simple supply and demand process. Even outside of the new build investment sector, on the secondary market, sellers are taking low ball offers meaning buyers can snap up bargains, which will change when they have multiple offers for their property.
This really is fundamental to consider, now the market is low and you can secure attractive pricing. The name of the game (with residential/buy-to-let thus capital growth focused options), is to ultimately buy low and sell high, once the confidence returns to the market, demand will increase and so will prices. 
Market Analysis
Don’t just take our word for it, to expand on the above, look at what happened in the financial crisis, those who purchased in 2008/2009 have made a fortune. See below for the UK Average Property Values from 2005 to 2019 according to the Office for National Statistics – 20/03/19:
 
So even if there is a no deal, which is looking unlikely, and there is a dip in the market, the above shows how resilient and attractive the UK property market is. Values have increased dramatically over the past 40/50 years and it’s unlikely they will stop anytime soon. Given the price increases, yields, legal framework, transport, world-class sport culture, educational institutions, international corporate presence etc etc…the UK remains one of the worlds most attractive investment markets.
Recent Years
Furthermore, looking at regional cities, these have continued to grow since the referendum. People were saying in 2016 they want to wait and see what happens and have lost +12% in capital growth, and 13/14% in rental income over 2 years in the likes of Manchester, Liverpool, Sheffield etc, when you consider a +£150k purchase price this is a substantial sum.
 
The latest data from Hometrack (part of the Zoopla Group) of February 2019 still shows the substantial growth of the regional cities. Manchester, for example, has grown 5.8% on average in the 12 months leading to February 2019.
 
You can see from the above that London has been hit, growing only 0.4%, this is namely due to prime and super-prime London seeing a big slow down, the commuter belt locations are still attractive in most cases in our opinion, whilst also providing better value thus rental yields.
Alternative Asset Classes
All of the above was referring to traditional residential property. Another factor to consider is the other asset classes that are available to retail investors, sectors such as Care Homes, Student Accommodation, Hotels and even Financial Instruments such as Loan Notes. Contact us to discuss the pros and cons of your options, however, the point is that there are options that offer fixed income and a secure, defined exit strategy – contractually guaranteed, thus not having to rely on market conditions. We have seen a shift in recent months from high end off plan residential property for +£150k with a mortgage purchase, to lower entry level cash investments from £55-£90k, offering lucrative, fixed returns and resales, when you consider a 10% fixed return for 10 years, plus a 125% buyback from the developer, assured, then this demonstrates why.
Summary
As expressed earlier, it’s only the right time to buy if your personal circumstances allow, however, if you’re in a position to do so, It’s very clear to see that the pricing available currently is far more favourable than it will be in two/three years down the line. Even for investors executing a strategy focused on growth, regional cities in the North West are still performing exceptionally well. Don’t read into negative press headlines and construct your whole invest plan of attack around these. Decisions should be based on the merit, finances and data available on the specific opportunity – operate as a business would in your decision-making process, not based on speculation or emotion.
Contact us today by calling 0203 815 6654 or send us an email to [email protected] to discuss your investment strategy.

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Student Accommodation Investment
CategoriesInvestor Advice Student Accommodation

The Advantages & Disadvantages of Investing in Student Accommodation

 

It’s been referred to as the best performing UK asset class in recent years, but is student property investment really a fast route to financial returns or just a fantasy?

There are a few high-profile articles such as this one which warns of the perils of investing in this sector, yet there still appears to be huge demand – institutional investors spent more than £4.3bn buying 51,150 student rooms in the UK last year, as reported by The Guardian. This article sets out what you can expect from your investment both positive and negative, enabling you to consider both sides of the coin and make an informed decision.

And whilst we’ll outline both advantages and disadvantages, please keep in mind that whether Purpose Built Student Accommodation (PBSA) is a good investment, or not, depends entirely on the investor’s personal requirements and objectives, as well as the project specifics including the market in which the scheme is operating.

With that caveat out of the way, let’s look at some of the advantages of investing in student accommodation.

Advantages of investing in student property

No Stamp Duty

With the entry-level of Student Accommodation typically being below £125k, investors will pay no Stamp Duty rates as introduced by The Finance Act 2016, exceptions do apply.

Higher/Longer Assured Returns

New build buy-to-lets tend to come with 0-3 year assured rental returns, both to incentivise investors and to allow large quantities of units to be absorbed into a market without flooding and owners suffering from long voids. With Student Accommodation you will find the yield percentage to be higher and typically for a longer period. It is not uncommon for developers to offer 8-10% NET returns for up to 5 years, this is the headline attraction for many investors. 

Fully Managed

Student developers will normally appoint a dedicated student accommodation management company to effectively run the entire site. This includes the sales process of letting the properties, managing the entire tenant lifecycle and maintaining both the rooms/apartments and communal areas of the building. You will find the rate is a lot higher than high street agents for regular residential properties, but due to the extensive communal facilities and inclusive pricing model, it is normally justified.

Strong Demand

You will still find that in most University cities across the UK there is a critical shortage of student accommodation. Many universities have just a couple of thousand dedicated halls of residence rooms, with the remaining students having to go into the residential market, mostly house-shares. However, this isn’t the case for every city.

Luxurious Facilities

PBSA is more expensive for prospective students than traditional options but the inclusive agreement and onsite facilities are a huge attraction, bills and Wi-Fi are typically included making it a convenient option. Prime locations, social areas, meeting rooms, gyms, cinema rooms, rooftop terraces, cafes, bars, and often a dedicated social program also drive demand. With parents often being a big part of the decision-making process (and paying of course) – onsite 24/7 security, approachable site management teams, secure key card systems, and an efficient maintenance service often mean the parents favour these dedicated student properties. From an investor’s perspective, having a quality product in comparison to market alternatives will bring in the rental income.

Positive Press

There are far more positive articles and statistics to support the investment than negative. Major research-focused organisations such as Savills and Knight Frank often report positive data for the market. The following are some examples from this year alone – Headline rental growth for purpose-built student accommodation increased by 2.55% for the 2017/18 academic year according to Knight Frank here. The market has a £46bn total value as the Guardian reported here and even Brexit may have intensified appetite for UK student housing. The UK saw over £2.1bn transacted after the referendum, compared to £1.9bn earlier in the year – Savills reported.

Disadvantages of investing in student property

If you’re more of the glass half empty type, here are the disadvantages which you need to consider before investing:

No Finance Available

There is no finance available for student accommodation projects, most mainstream lenders will not lend against this asset class.

Capital Growth

This is one of the main disadvantages of student accommodation. Investors need to be aware that you will not see the same increase in property value year on year as you would with a typical buy to let property. Of course, this will vary from market to market and project to project, but the general rule of thumb is that if you are mostly focused on strong capital growth, then perhaps stick to residential property investment.

Resale Market

Another key factor to consider is your resale market. When you come to exit and want to sell on the property, you will only be able to sell to a cash investor, not an end-user. This restricts your options drastically.

Assured Return

‘Assured return’ effectively means contractually guaranteed, which is where the developer will provide a contract stating the agreed return. However, in the rare case the developer goes bust your contract won’t be worth much as ultimately the developer won’t have funds to pay investors. Although problems are rare, you should ensure projected rents are realistic and provide an attractive return after ground rent, service charges, and management fees, this will ensure you’re less reliant on the assurance.

Summary

The popularity has rocketed in the UK in terms of demand from tenants and developers to build student accommodation. In fact, there are 25,000 bedrooms to be built before the 17/18 academic year as mentioned here and £5.3bn is expected to be injected into purpose-built student accommodation in 2017 – see here.

There is certainly no lack of investors ready to snap up the student ‘pods’ or self-contained apartments, which, by the way, are far superior in quality compared to the old-fashioned halls of residence traditionally associated with university accommodation.

The new breed of student halls is here to stay for the long term. If you are looking for a fully managed option, high rental return, happy to buy with cash, and not achieve extensive growth, then a property in this asset class could make a fantastic addition to your portfolio.

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