How do you choose the perfect investment property? Is it a matter of buying at the right price, in the right location and at the right time, or are there others key factors?
James Bailey, Chief Executive of Henry & James, has more than 30 years-experience in the south west London property market. He has advised clients at all ends of the spectrum, from families looking to renovate and move up the housing-ladder, to wealthy investors who want to build their property portfolios.
Here James shares his insights and experience in our Henry & James mini-investment guide.
Q: What should I look for in an investment property?
A: Location, location, location is a familiar term for most house-hunters. Yet for me, it is also accessibility. This is just as important as location. Accessibility to transport is the number one priority for many tenants, so this should be a key priority for investors, too. Whether the home is priced at £500,000 or £5m, tenants want good transport links to reach their place of work most importantly. There is also the need for accessibility to schools, restaurants shopping etc.
Q: How do I get started?
A: Once you do your research, start building a rapport with your agent. Their local knowledge is invaluable. They are the “eyes and ears” on the ground in the marketplace. A good agent will tell you when a new property is for sale, usually before it appears on their website or the property portals. Make sure you are in a position to move fast to seize the opportunity.
Q: How long should you spend on research?
A: It all depends on how well you know an area. Follow apartments or houses online to check how quickly they let or sell in the neighbourhood. This will give you a good indication of the property’s market value.
Q: Should you take a long-term or short-term view?
A: The goal is to buy at the right price at the right time and in the right place. Realistically, people own their investment properties for between five to ten years, so think long-term. You are looking for two things with an investment property: rental income and capital growth.
Q: Are your finances in place?
A: Organise your finances early on. There are some good mortgage deals out there at the moment. The days of 100 per cent mortgages are gone, so aim for a 20 – 40 per cent deposit. Factor this into your calculations as well as stamp duty, solicitors’ fee and any other set-up costs. A good accountant will advise on any potential Capital Gains Tax (CGT). It sounds obvious, but live within your means and ensure the monthly rental income covers the basic costs. Build all these factors into your business plan from the outset.
Q: Who is your target audience?
A: In the prime areas, including Belgravia and Knightsbridge, the target tenant ranges from 35 – 65. Whereas in Battersea or Fulham, the demographic drops to about 25 – 35 year olds with younger families. Good schools are a major consideration for many people. There are plenty of top schools in south west London.
Q: What floor should I buy on?
A: It is often said that the first or second floors are most sought after and therefore the prime investment. I am not in total agreement with this simply because even a lower-ground floor has its own appeal for tenants who are looking for outside space. Top floor flats also have their own appeal for light and views.
Q: How do you overcome void periods?
A: Do not be greedy with rental income. Charge the market value for your property. One way to overcome a void period is to include a clause in a tenancy agreement that allows you to carry out viewings two months before the lease comes to an end. However, it’s key to respect the tenants’ privacy as it is still their home and a good way to do this is to have an agreeable time slot one or two days a week.
Q: Any final advice?
A: Be practical about your investment, do your research and keep in touch with the market. Ask your agent for advice and remember bricks and mortar is one of the most resilient investments you will ever make.
- Are you thinking of moving in 2017? For advice on letting, buying, selling, or moving, contact Henry & James at 1 Motcomb Street, London SW1X 8JX (020 7235 8861; firstname.lastname@example.org).