Is investing in property still a good business choice for those who want to invest and renovate or invest and rent?
In recent years there’s been much negativity around private rental with more taxes being introduced and further regulations coming in which landlords must pay and obey. As a result some private landlords have left the building.
Prior to that and with the introduction of buy-to-let mortgages in the 1990s returns on this type of property outstripped other major investment assets available. In 2015, it was reported the net annual return averaged 16.2 per cent as against 6.2 per cent in UK equities (economist Rob Thomas).
Like all business, property investment and development is cyclical and there will be highs and lows. Those who are serious about investment, like me, are in it for the long term and also with an eye on changes and demands.
It’s this ability to flex and move and make smart decisions which has kept my portfolio – and that of my clients – growing steadily. Currently much of my focus is on renovation and selling of properties, often called ‘flipping’.
Property is a solid investment. The average cost of a UK home is holding quite steady. According to This Is Money between January 2018 and January 2019, the highest month for this average value was August at £232,116 and the lowest was March at £223,635.
Also the demand for housing is strong and while housebuilding is increasing, it’s not keeping up with that demand yet. Therefore the ability to renovate and sell on in a timely manner makes good business sense.
If property is something you are interested in my top tips for 2020 may help:
- Thoroughly research the area you wish to invest in – you have to have good local knowledge of the landscape and local market.
- Hotspots for this year include Birmingham, Liverpool, Sheffield, Manchester and South Wales.
- When viewing properties make a detailed list of all the defects and never underestimate the cost of putting those building defects right.
- Beware of damp, check for rot and be subsidence savvy.
- Draw up a realistic schedule of works and costs then build in a contingency fund of around 20% and always stick to a budget.
- Time is money, so keep on top of the project, don’t cut corners.
- Ensure if you are doing any structural work you have building control certificates to cover it.
- Most properties will have a ‘ceiling limit’ i.e. the maximum sale price that property will achieve, so don’t overspend on the project emotionally. Keep your business head on.
- Keep your buyer in mind when you are renovating – don’t indulge in your own passion for bright pink bathrooms!
- Take out adequate insurance at exchange of contracts. Keep it tight, keep it legal.