Property is one of the most lucrative businesses to get into, and the financial rewards that you can reap can set you up for life. Working in property investment typically focuses on generating returns by either investing money into the property sector in general, or, by involving yourself in the act of physically buying, developing and selling property. Those who choose to invest can often live off the generated income of their buy-to-let properties, and can make even more income by developing houses and increasing their resale value. However, property investing can be an extremely competitive industry, and the benefits of being your own boss, in addition to the income and longevity of the business are things that attract and persuade people to step into this venture. Alongside the competitiveness of the industry, there are also lots of things to consider, such as the legal side of property investing, and how the mounting costs will affect your current financial position. Here at We Buy Any House, we have compiled a small guide to the world of property investment, including the legal side too.
What Makes the UK Property Market Appealing?
Despite the hardship the property industry faced throughout the Covid-19 pandemic, real estate in the UK has continued to present new and attractive opportunities for potential investors. The ability to invest is maximised by the fact that the UK property market is in some ways mature, in that there is structure and expertise in those involved in the field. Over the last couple of years, small towns and quieter cities have become hotspots for those who are looking for investment opportunities, such as Manchester and Birmingham. In the past 20 years, properties in the UK have risen by more than 17.5%, going from an average of £81,650 to £224,340. This means that we’re existing in a time where interest rates are providing safer investments, and that generated returns are tangible.
Start By Having the Right Mindset:
Before starting any project, it’s important to have the right mindset, and this is something that definitely needs to be consistent when you’re investing in property. Involving yourself in the business/investment side of property will require a lot of resilience, determination and hard work, in addition to a certain savviness when it comes to the financial aspect of things.
Do Things to Help You Save Up:
The short of property investment is simply that- you can’t invest in property unless you have the financial funds. There are a few ways to save up and have the best financial head start, these include:
Taking in a Lodger:
Having someone else that shares your space but also contributes to your rent is a great way to help you save money. The Rent a Room scheme can earn you up to an extra £625- without paying any tax on this income. It’s also a great way to get used to tenant needs and understanding what you should expect when you become a landlord.
REIT (real estate investment trust) enables you to deposit money and work your way towards your first property development. The shares in commercial and residential property enables you to create a portfolio and with the relatively low risk income and generous offers, 90% of the profit remains with shareholders and is protected against long term company leases.
Peer lending is the option to invest directly with other companies or people, mainly through platforms such as Zoopa- which help you to sort out the transaction instead of using a bank. As the bank won’t be taking a cut, you will be able to see growth in your ROI (return on investment).
Property crowdfunding is where various groups of investors group their money together so that everybody owns a small share in the investment, which will give you a share in equity.
Expenses of Property Investment:
When it comes to property investment, there are plenty of expenses involved. Some of the direct costs included are:
- Auction fees/ mortgage fees/ mortgage interest/ surveyor fees/ land registry fees/ stamp duty and buy to let insurance.
Additional costs may be included in things such as:
- Management and rental company fees/ maintenance/ council tax/ capital gains tax/ estate agent fees and legal costs.
Get a Solicitor/Legal Team:
It’s important to have a good solicitor and legal team on your side, who are experts in their individual fields. Your solicitor will be responsible for receiving the memorandum of sale from your estate agnent, and be there to instruct you on the legal side of the investment. A legal time can help you in a time of crisis, and offer sound advice and perhaps an exit plan and strategy in case things go wrong. Some things your solicitor is responsible for:
- Ordering local searches- including risks such as flooding, land contamination/ historic mining etc.
- Getting hold of a freeholder information pack- which will have the right information about services charges and goods, major works and ground rent.
- Issuing and revising a draft contract.
- Discussing any issues/questions from your vendor.
Make Sure You Get a Survey Completed:
When it comes to your property investment, your mortgage lender will more than likely want you to take a survey before offering and releasing the funds. Although this is just a quick assessment (mostly for their purpose), it can be a legal requirement depending on the type of property you want to own.
Typically, a Building Survey (previously known as a Structural Survey) was only required for old properties, those that undertook non-standard construction methods, or listed buildings. Alternatively, you can opt to do a Homebuyer Report, which costs on average between £300-£500.
Understanding Your Legal Responsibility as Landlord/Owner:
It is critical that you understand your legal requirements as the landlord and owner of the property- especially if you intend to undertake the buy-to-let approach. You will be your tenants direct contact of approach, so it’s important that you are clued up about their expectations of you as you don’t want to end up with a lawsuit or worse, injury or damage to your tenant or property.
This article was written by a quick house sale company We Buy Any House. If you’re wondering “how can I sell my house fast?”, head to the We Buy Any House website for more information relating to all property related enquiries.