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Top 10 Tips 4 Investing In Uk Property

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Top 10 tips for investing in the UK property market

Henry

Davis

1. The 'location rules' are changing AT one time Irish investors would have tended to choose plush city centres or areas where they would feel comfortable living themselves.

However, the UK has seen some of the highest capital appreciation in some of the roughest, most ostensibly undesirable areas. Just because you wouldn't move there yourself doesn't mean it's a bad investment. Many city centres are well supplied with buy to let properties and often you can find higher yields in secondary areas. Choosing locations with strong capital growth is often a lottery. The trick is to try and establish local supply and demand dynamics and establish local job growth. Limited new building supply will increase prices and obviously employment growth creates demand. 2. Research your rental market THE UK rental market is 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.

Many developers advertise certain yields on their marketing material, however if you plan to rent apartments out over a long period perhaps over 10 years its important to establish the long term rentability. Population growth is the key to achieving long-term actual rental growth. 3. Transaction costs reduce returns STAMP Duty will reduce your overall yield. If you purchase below £120,000 there will be no stamp duty. Another tip for reducing transaction costs is to organise your own furniture, this may be time consuming but you should furnish your apartment for under £3,500. 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? 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 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. 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 two-bed apartment in an area with hundreds more two-bed apartments. 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? Many property owners have generated profits by being on the capital appreciation bandwagon; however this is mainly down to good luck in a long term rising market. 6. Dealing with mortgage brokers AS A general rule you can expect 80pc loan to value when purchasing a UK property. The cheapest way to finance your purchase is to re mortgage in Ireland at euro interest rates. The three main lenders providing sterling finance for Irish buyers purchasing UK property are IIB Home Loans, Capital Home Loans and Bank of Scotland. 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. It is possible to secure finance direct from a UK lender, however they sometimes offer lower loan to value to non-UK residents. 7. Rental schemes BEWARE 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. Rental guarantees are sometimes offered in areas where there is an over supply of rental properties. 8. Dealing with estate agents REMEMBER your negotiating skills can be your most underestimated tool. Some estate agents have a built in habit of implying there is more actual demand than there really is. The Irish have a strong reputation for being cash rich buyers and some unscrupulous estate agents may take advantage of this. 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 if 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 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. Purchase your property within a pension fund RECENT changes in the 2004 finance act have created new options for geared investment in residential and commercial property with pension schemes. Given the housing market in the UK does not appear to be over priced in value terms in comparison to the Irish market, buyng property through a pension fund is an ideal tax efficient vehicle. In the past, those retiring were obliged to purchase an annuity, however due to new legislation you now have the freedom to manage your own pension fund. Pension mortgages are similar to endowment mortgages but with a number of additional benefits.

The premiums qualify for relief at your marginal tax rate (42%) in general you can take 25% of the fund tax-free on retirement, with the balance taxed at your marginal rate when withdrawn.

Henry Davis an Irish based property developer from Sligo, his company International Property.ie specialises in targeting regeneration areas and areas with above average returns.

Contact Henry at www.internationalproperty.ie or on 087-23 44 000.

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The Irish have a strong reputation for being cash rich buyers and some unscrupulous estate agents may take advantage of this.

Translation

The Irish have a strong reputation as an easy mark, amongst Cockney Wide Boys, who will fillet these kippers with relish.

Edited by Duplex

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Top 10 tips for investing in the UK property market

Henry

Davis

1. The 'location rules' are changing AT one time Irish investors would have tended to choose plush city centres or areas where they would feel comfortable living themselves.

However, the UK has seen some of the highest capital appreciation in some of the roughest, most ostensibly undesirable areas. Just because you wouldn't move there yourself doesn't mean it's a bad investment. Many city centres are well supplied with buy to let properties and often you can find higher yields in secondary areas. Choosing locations with strong capital growth is often a lottery. The trick is to try and establish local supply and demand dynamics and establish local job growth. Limited new building supply will increase prices and obviously employment growth creates demand. 2. Research your rental market THE UK rental market is 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.

Many developers advertise certain yields on their marketing material, however if you plan to rent apartments out over a long period perhaps over 10 years its important to establish the long term rentability. Population growth is the key to achieving long-term actual rental growth. 3. Transaction costs reduce returns STAMP Duty will reduce your overall yield. If you purchase below £120,000 there will be no stamp duty. Another tip for reducing transaction costs is to organise your own furniture, this may be time consuming but you should furnish your apartment for under £3,500. 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? 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 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. 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 two-bed apartment in an area with hundreds more two-bed apartments. 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? Many property owners have generated profits by being on the capital appreciation bandwagon; however this is mainly down to good luck in a long term rising market. 6. Dealing with mortgage brokers AS A general rule you can expect 80pc loan to value when purchasing a UK property. The cheapest way to finance your purchase is to re mortgage in Ireland at euro interest rates. The three main lenders providing sterling finance for Irish buyers purchasing UK property are IIB Home Loans, Capital Home Loans and Bank of Scotland. 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. It is possible to secure finance direct from a UK lender, however they sometimes offer lower loan to value to non-UK residents. 7. Rental schemes BEWARE 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. Rental guarantees are sometimes offered in areas where there is an over supply of rental properties. 8. Dealing with estate agents REMEMBER your negotiating skills can be your most underestimated tool. Some estate agents have a built in habit of implying there is more actual demand than there really is. The Irish have a strong reputation for being cash rich buyers and some unscrupulous estate agents may take advantage of this. 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 if 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 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. Purchase your property within a pension fund RECENT changes in the 2004 finance act have created new options for geared investment in residential and commercial property with pension schemes. Given the housing market in the UK does not appear to be over priced in value terms in comparison to the Irish market, buyng property through a pension fund is an ideal tax efficient vehicle. In the past, those retiring were obliged to purchase an annuity, however due to new legislation you now have the freedom to manage your own pension fund. Pension mortgages are similar to endowment mortgages but with a number of additional benefits.

The premiums qualify for relief at your marginal tax rate (42%) in general you can take 25% of the fund tax-free on retirement, with the balance taxed at your marginal rate when withdrawn.

Henry Davis an Irish based property developer from Sligo, his company International Property.ie specialises in targeting regeneration areas and areas with above average returns.

Contact Henry at www.internationalproperty.ie or on 087-23 44 000.

It is important to establish the rentability of a property over 10 years? A nice simple calculation (guess) for your average BTLer... :rolleyes:

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It never occurs to people that if the locals aren't buying them, they should steer clear too.

Instead, people have swallowed the hype that the Irish are now infinitely richer than the Brits and afford to buy all their houses. Fill 'yer boots!!!

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  • 336 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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