Help & Guides

Top Tips for Buying in the UK

Top 10 Tips for Investing in the UK

1. The rules about what is a good location are changing.
In previous times many Irish investors would have chosen plush city centres or areas they would have felt comfortable living themselves.  The UK has seen some of the highest capital appreciation in some of the roughest, most undesirable and sometimes crime-ridden areas, so just because you wouldn’t move there yourself doesn’t mean it’s a bad investment.  Choosing locations with strong capital growth is the key to success in the property business.

2. Research and understand your rental market.
The rental market in the UK is generally fairly strong, however be careful if purchasing in large blocks of apartments exclusively sold to investors, which can often complete together bringing large supply into the market at one time.  Twenty or thirty apartments can easily find tenants, but prepare to wait longer if you’re the owner of an apartment in a block where hundreds of apartments become available to rent at the same time.

3. Remember transaction costs seriously reduce your returns.
Stamp Duty will reduce your overall yield, so if you purchase below £125,000 there will be no stamp duty.  One of the main benefits for Irish buyers purchasing in the UK is the lower stamp duty.  In order to reduce this cost look at properties below the £125,000 price range. If you purchase below the stamp duty threshold your only transaction cost will be your legal fees.  Better-known brand name solicitors can cost about £1,000 to £1,500 including all your disbursements and legal search fees. 

4. When is a discount not a discount?
When is a discount really a discount?  It is easy to get discounts on higher value properties or over priced properties, especially in some city centre locations where there is limited demand for such properties and too much supply.  Remember list prices are developer driven and they always tend to price at the top of the range.  Just because you receive a ten percent discount doesn’t mean you secured a bargain.  You may be better off paying list price for a property that is already more realistically priced, with good local re sales demand. 

5. Achieving short term capital appreciation.
The key to achieving short-term capital appreciation is to choose the correct product.  There is limited capital appreciated prospects if you purchase a 2 bedroom apartment in an area with hundreds or thousands more 2 bedroom apartments either completed or in the planning stage.  If you wish to beat the market you need to establish which segment of the market has the least supply and the most demand.  Talk to local agents and ask which type of properties are selling fastest, is it one bed apartments or three bed family homes.  The best tip I can give is that the more research you carry out the better your results will be. 

6. Finance and the perils of dealing with mortgage brokers.
As a general rule you can expect eighty percent loan to value when purchasing a UK property.  However beware of mortgage brokers suggesting they can secure above eighty percent loan to value. The three main lenders providing sterling finance for Irish buyers purchasing UK property are IIB Home Loans, Capital Home Loans and Bank of Scotland. One of the most challenging aspects in purchasing a property in the UK is actually getting loan offer in time to meet completion deadlines.  This issue is compounded by some brokers who lead purchasers to believe that loan offer is a formality and is simple to achieve in a few days or a couple of weeks. Remember there is a major difference between getting a verbal offer in principal from a lender and actually seeing a copy of your loan offer.  Irish buyers tend to be very passive when it comes to arranging finance

7. Rental schemes.
Beware of guaranteed rental schemes, as they are just another word for discount.  Developers can often offer discount or rental guarantees, there is no difference as both are just accounting exercises. Property with rental guarantees are turned into a financial instrument far removed from the basic qualities of location, bricks and mortar making it difficult to value property subject to rental guarantee mechanisms.

8. Dealing with estate agents.
Remember your negotiating skills can be your most underestimated tool that can help you save thousands.  Estate agents often over estimate values and many often test the market with high unrealistic prices.  Estate agents have a built in habit of implying there is more actual demand than there really is.  Remember to play a long game, make a lower offer and stick to your guns.  The best negotiation strategy is to be able to highlight comparable properties selling in the area, basically you can show the agent that a similar property in the same area is selling for less, and then it’s easier to justify the price you are offering.

9. Decide on your strategy.
There is no ideal strategy in terms of trying to find the right way to purchase UK investment property.  Different investors go down different paths.  The strategy that will work best is a strategy based on your long-term goals in line with your financial position. If you are a first time investor with limited resources be careful to choose a property with good rental income, otherwise you will end up sending large monthly top ups to your mortgage provider.  Always look at cash flows, establish your monthly costs against income, this is a simple task and won’t require any input from your accountant or financial advisor. 

10. Focus on the deal rather than the location
Don’t have tunnel vision when it comes to buying a certain location or don’t rule out a deal, because you don’t favour that location. Many Irish buyers look to particular cities when buying in the UK, but reject others because they may have visited a city on a holiday or read something about that city in the papers. Rather than focus on a city, look closer at the deal being offered rather than rule out any particular location. Figures matter more than the location. The strength of rental market and the re sale demand is what really matters Focus on the figures, the rental dynamics and if you can find a location with strong local owner occupier demand you will have no problem selling your property when the time comes.

Author: Henry Davis  of InternationalProperty.ie