Sequre Series: What to consider if you're a first time investor
This article was updated in February 2018
New research has found that 49% of savers in the UK believed that property would provide them the best returns for their retirement*. Buy to let has had its fair share of obstacles over the last few years, but new reports are regularly surfacing and cementing buy to let’s future as the best performing investment type. If the numbers stack up, anyone looking to bring in an income from their portfolio can still do so by being smart and making the right choices.
So why should you take the first step into property investment? Everyone has their own personal reasons for investing, and what may suit one investor may not be ideal for another. Obvious reasons for investing in property are:
- It can produce a high income
- Buy to let can used to generate an income for retirement, particularly for a generation not wanting to rely on annuities
- It’s flexible enough to fit around the lifestyle of many modern-day working professionals who are cash rich but time poor
For anyone contemplating a buy to let investment for the first time, it can be difficult to know where to begin. There is a plethora of information to take in and with upfront deposits and associated fees to pay out, it is understandable that some first-time investors can be hesitant to take the first step. As property investment specialists, we’ve put together some key factors for anyone considering a buy to let property purchase:
1) Property still provides the best returns
Even with changing market conditions, buy to let property has been proven to continually deliver strong profits for investors; it completely outperforms all other investment types including stocks, pensions, bonds and ISAs. No other type of investment has that balance of low risk with the addition of producing large profits. If investors are smart with their property decisions and invest in the right locations and the right price, there is the potential to build portfolios worth several million pounds. Read further on how to generate returns from house price growth here.
2) Hands-off is a viable option
One main aspect of buy to let which appeals to the large majority of investors is the ease and flexibility it offers. Essentially, it can be as low maintenance as possible, thanks to the use of letting agents who can manage anything from one property to entire portfolios. This allows landlords to have very little involvement in the day-to-day running should they choose to, meaning they can still maintain a full-time job and family/social life whilst still earning a substantial profit from a growing portfolio. For anyone concerned about agents fees, it’s important to remember that agents not only take away the demanding management side of property lettings, but they’re in a better position to negotiate rent increases than a landlord with little experience, resulting in the costs giving you the potential to earn even more than you would hands-on.
3) Be open-minded with locations
As an agent, we often come across first time investors who are keen on investing in similar properties to their own home within close proximity to where they live. While this is understandable, we’re always keen to encourage new investors to look further afield at the rental yields that can be achieved in other parts of the UK. Cities such as Manchester, Liverpool, Birmingham and Leeds are extremely profitable when it comes to property as apartments are affordable, yet do have the potential for capital growth. Northern cities also generally provide higher rental yields, and have done for many years, with Manchester and Liverpool averaging around 6-7% on a standard 2 bedroom apartment. Compare this to further south of the country, and you could be lucky to see 3-4% yields in some areas. The market in the likes of London in particular has become unfavourable, with house prices falling, taking away even more earning potential, so think carefully about this when choosing your property location.
It's never too late to invest in your first buy to let property. To find out more about how we can help you start your journey, contact us today. Our team can help and advise you on where to find the highest rental yields across the UK and which properties can give you the best returns on your investment. Give us a call on 0800 011 2277.
*Source: ONS Wealth and Assets Survey