There are risks in everything, and investment in overseas properties is no exception. The key to success lies in minimising the risks to create the most substantial profits. In fact, as long as you always bare in mind the following do’s & don’ts in the rental business in the UK, it is not as difficult as imagined to make stable earnings from it.
Hong Kong citizens value quality and the same is most certainly the case for property investment. To avoid traps, one must make careful choices. Whether it is first-hand or second-hand properties, quality matters more than ever. No matter how nicely situated the property is, tenants are likely to make disputes, or even terminate their tenancy, when something is majorly wrong, and the poor quality of the building also limits the potential for price appreciation. Therefore, it is not a bad idea to start with a leading developer when it comes to property investment.
Since they offer higher credibility and guarantee in the quality of delivered property as major selling points, the brand effect of reputable developers makes their properties sell like hot cakes. Hong Kong people will find this true when they think of the popularity of flats from one of the well-established local developers. Geographical locations create no difference in the desire for quality. Investing in the right property puts you on shortcuts to financial freedom, so reliable developers should always be the first choice for property investment.
Students are ideal tenants but they tend to have a higher turnover rate than family tenants and professionals. The 2-month gap of summer vacations in each year may also add up the cost and reduce the rate of return. Unlike Hong Kong, council tax must be paid every year in the UK in addition to rates and government rent and other miscellaneous fees. The tax will be under the tenant’s bill if the flat is rented out. Otherwise, the property owner must pay for it during the vacant period.
In addition, it is undeniable that families and professionals, compared to students, generally have a greater financial capacity, and most of them make long-term rentals. They are thus willing to pay more in exchange for a more luxurious and comfortable living environment. The risk of rent arrears for such tenants is also lower, minimising chances of unauthorised occupancy. With punctual rental payment and a stable cash flow, you will have no trouble in making profits as a landlord.
First-hand and second-hand properties answer to different preferences and you have no pressing need to secure tenants under the increasing housing demand. The level of rental income is what draws the difference. Newly completed, first-hand buildings have a young property age and more enhanced facilities than the second-hand ones. Some of the first-hand buildings are located in prime locations, which certainly means a higher bargaining power than the second-hand in the same district. In other words, the former generates more substantial rental income.
Moreover, the transaction process of second-hand properties in the UK takes longer than that of first-hand buildings and it could go from 3 months to half a year. Late transaction means late handover which causes losses of rental income for several months. On the contrary, first-hand property allows immediate profits. Some developers even provide rental agency services to help rent out the property faster and start your future towards financial freedom by creating passive income.
If you have set a clear goal on rental income and make investment your priority, you cannot simply buy a property for its low price. Even if it is used for personal use, you would hope for price appreciation and expect to cash out in the future for a new flat. So, wouldn’t the same expectation apply to properties for rental business? In that case, you are supposed to select real estate with the best quality possible within the budget. For example, properties located in prosperous commercial and residential areas with convenient transportation and strong demand are some of the great choices.
If you have a more sufficient budget, you are further discouraged from buying ex-council houses which can cost nearly half the market price. Despite good quality and low capital requirement, they have relatively weak appreciation potential and inferior rental capacity. As capital is a limited resource, you must buy for what’s worthy to maximize your investment return.
News on long-distance purchase scams should not be uncommon to you. This is a strong reason for which long-distance purchase should be avoided, especially when it comes to properties for rental business and long-term investment. In case of unsatisfying quality, restrictions on rental purpose, or even purchased flats with little demand, you would cry over spilled milk then.
Yet, if you truly encounter some very high-quality properties, you are advised to choose only the ones from reputable and well-known licensed developers in the UK. You must also find out about the property details and supporting facilities from the developer first, or consult reliable local real estate agents before making the decision. Only in this way can you make a targeted purchase on properties with a good rate of return and generate steady profit from rental business.
Long-distance purchase is difficult enough, not to mention long-distance leasing. It might be true that you can save agency fees by managing it yourself, giving you a false impression of higher investment profits. But unless you are very familiar with the UK property market and leasing procedures, you are not recommended to manage leasing matters by yourself.
Procedures related to leasing are often quite complicated and there are many tasks ranging from negotiation on lease agreements, payment methods, rent collection to flat maintenance issues, etc. There is also essential expenditure to be paid, including advertisements, tenant screening, etc., which could cost about 400 to 800 pounds. Even if you are a local landlord, it takes time and effort to take care of the business, not to mention for overseas landlords. Time cost matters – the gain from renting out on your own may end up not worth the pain.
The truth is, when you choose the right rental agent, instead of costing you more, it brings positive impact on your investment return. Rental management fees in Manchester range from approximately 8% to 10% of monthly rental income + 20% VAT (value-added tax from the government); investors who purchase Salboy properties can enjoy discounts well below the market price and rental agency services from our property management company LOCAL. The services include rent collection, payment of miscellaneous fees, management fees, government rent, and preparation of tenancy termination reports, etc., while the charge is about 7.5% + 20% VAT of monthly rental income. Together with pre-rental services such as tenant search, the fees (tax included) cost only about 9% of rental income, which is 15% to 16% cheaper than the normal rate in Manchester. Appointing SALBOY as rental agency saves you time from screening and searching thanks to its efficient, reliable and professional service.