Checklist for investing in UK property

As financing options for expats and foreign investors expand, and attractive new developments hit the market, investing in UK property has become evermore appealing.

Affordable housing options and impressive growth and yields outside of London along with exchange rate advantages are seeing the UK property market become hugely attractive for investors in the UAE.

However, yielding strong returns from your investment in UK property is reliant on buying the right property in the right area. While some areas of the UK have performed admirably, on average across the UK as a whole, prices have fallen when compared with inflation over the last ten years, as high growth areas are averaged out by more negative regional markets. 

This really emphasises the importance of having a clear, well considered strategy.

Make sure the figures work
Since the aim is to make money on your investment, it’s vital to ensure that rental returns exceed your mortgage payments, and all associated running costs to leave you with a monthly return. Even if your strategy relies on taking advantage of capital growth rather than a monthly income, purchasing an asset that creates a deficit each month can be disastrous.

Do your research on the costs of purchasing including mortgage payments, service fees, management fees along with the rental value of similar properties in the area.

It’s important to put financing in place before you search for properties so you know what you can afford, how much you are allowed to borrow and what properties and areas your lender will allow.  Some areas of the UK or particular rental strategies may not be acceptable to lenders.

Most lenders will grant an agreement in principle to investors to indicate initial approval and the amount they are willing to lend against a property. Agents and sellers may wish to see an agreement in principle to demonstrate proof of funds before accepting an offer.

Mortgage lenders both UK based and offshore have increased the range and availability of buy to let mortgages open to expatriates and foreign nationals to purchase in the UK, with many requiring just a 25% deposit, offering affordable rates and available for a term of up to 25 years.

While London remains a draw to many, investors are flocking to buy properties in northern cities such as Manchester. Leeds and Liverpool where properties are more affordable and rental yields can be much higher than in London, offering a better return for many. However, investors may also consider the potential for capital growth as a factor.  Cities or towns with strong economies, job prospects, infrastructure and transport links, good schools or higher education are likely to create stronger rental demand. Rental returns will vary hugely across the UK and it’s important to understand the potential returns in the areas you focus on.

Property investors often refer to their ‘team’ – utilising the expertise of mortgage advisers, lawyers, tax advisers, accountants and property management can be vital in ensuring the efficiency of the property and investment strategy while making sure the returns are maximised. It is of the utmost importance to your property investment get the right mortgage, tax advice or management in place to give the best chance of a successful outcome.

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