6 top tips for UK property investors

According to figures from the Office of National Statistics, over the last decade or so, the average cost of a house has increased by 50% - even with the recession in 2008 which saw property prices fall.

Read on for 6 top tips for UK property investors to consider…

1. Know who your target tenant is

There is no point buying the smallest (or biggest) property you can afford simply because you like the look of it.

If you are looking to attract solos or young couples, then a one or two bedroom flat or home may typically suit your needs.

Alternatively, if you are investing in a student town, then you may be considering a larger property in order to house multiple tenants.

2. Consider the location

This point should also be considered alongside knowing your target tenant. If you are looking to attract commuters, for example, a property within walking instance to the railway station and with a quick commute to the nearest large town may typically be more attractive and therefore, easier to let.

Similarly, if you want to attract a family, look for properties in the catchment area of good local schools.

Basically, think about what your target tenant would want from the area.

3. Hands-on or hands-off?

If you aren’t investing locally, then it is likely you will employ a lettings agency to manage the property on your behalf.

If you are investing close to you, consider whether you want to be a hands-on landlord or pay an agency to do it.

While managing your properties can mean cost savings (lettings agencies typically may charge around 10-15% of rental income), do bear in mind that you’ll have to make sure you keep up to date with ever changing landlord legislation (if you don’t, you could be fined) as well as potentially getting calls at 3am to change a light bulb!

4. Do the maths

Buying a property isn’t just about raising a deposit and then making the monthly mortgage repayment (hopefully which your rental income will cover). You need to factor in other costs associated with the property such as:

• Surveyors’ and solicitors’ fees
• Creation of contracts and inventories
• Stamp duty land tax (SDLT) - remember, any additional UK property you now buy will attract an additional SDLT of 3% on top of the standard rate if you already own a residential UK property
• The cost of furnishings
• Landlords insurance (you may also need empty property insurance if the property is standing empty while you redecorate or find a tenant)
• Lettings and management agency fees (if applicable)
• Ongoing maintenance
• Tax

All these costs can mount up in to a tidy sum, so make sure that your expected rental income will easily cover any outgoings. Plus, you also need to factor in periods when the property may be unoccupied and therefore not bringing you any income.

5. Don’t forget your obligations as a landlord

Whether you are using a management agency or self-managing your investment property, you cannot get away from landlords’ obligations.

As a landlord, you have a duty to keep the property in which your tenant resides safe and healthy. The Government has a number of obligations that you, as landlord, need to fulfil.

While this list is not exhaustive and may apply only in some parts of the UK, it is important that you make sure you understand exactly what your obligations are. For example, you need:

• an annual boiler and central heating carried out by a Gas Safe registered engineer
• carbon monoxide detectors in rooms with a usable fireplace or wood burner
• to ensure you have a smoke alarm fitted on every storey
• to make sure that all furniture and furnishings you supply are fire safe.

There are also rules and regulations laid out by the Health and Safety Executive that you need to comply with.

If you are planning to self-manage your investment, then keep on top of legislation by signing up to a few landlord websites, such as Landlordzone.

Failure to not comply – even if you genuinely were unaware of a particular piece of legislation – could not only see you face a hefty fine, but could invalidate any property insurance you have.

6. Be realistic

Finally, do remember that with all investments, if things don’t go to plan, you could end getting out less money than you put in.

And if you have an emergency and need to access your capital fast, typically you may find it hard to get your money out quickly.

What next?

If you understand the risks involved, you could find that investing in UK property is a satisfying, financially rewarding, business.

Hopefully these six top property investment tips will help you make an informed decision as to whether it is something you want to do.