Last year was certainly one to be remembered, as Donald Trump won the USA presidential election and the UK voted to leave the EU.
Brexit caused a stir in the market, leaving investors uncertain whether to invest in buy-to-let. In addition, the Private Rented Sector (PRS) has taken some blows from the government and many investors ended up complaining that their investment has not reached their expectations. This tends to happen either because they had unrealistic expectations, or those ideas were simply undefined. These changes targeting the PRS affected mostly new investors without a plan, thus they will have a harder time dealing with legislation changes, tax bills and paying the increased stamp duty charges.
Let us put it this way, these changes have made it harder for new investors to enter the market, with higher stamp duty charges and a higher capital needed for a deposit. However, what happens when these barriers of entry to the market become higher and higher? You get less and less competition, and those who lack a strategic plan or a set vision, end up dropping out.
Therefore, it is imperative to have a plan and full support throughout the whole process. Imagine embarking on this journey by yourself? Luckily, we’re here to help. Knight Knox offers services from the very beginning of a property’s lifecycle, while getting heavily involved in every stage of the process, all the way through to the eventual disposal of your investment. You can also have a look at our Investor Advice Section, where you can find investment guides, tools to help you calculate your rental yield and extra costs, market reports and much more.
Firstly, you should thoroughly research the buy-to-let market and the location you want to invest in, to gain insights on the risks and benefits, extra costs involved and whether the location shows promise. Investing in buy-to-let can earn you tens of thousands of pounds, but only if you are knowledgeable and well informed about the market and what you are doing. You must do the maths. So, our advice would be for you to write down the costs of properties you are currently interested in and the rent you are looking to get. Alternatively, you can use our Rental Yield Calculator, which allows you to add extra costs for a more accurate result.
Everyone’s situations are different and, while the majority of buy-to-let purchases are cash transactions, some investors may need to investigate a mortgage. If that is the case, Knight Knox Mortgage Solutions, our in-house mortgage department, is on hand with over 13 years of experience in the UK mortgage market and can offer advice on financial areas including re-mortgaging and equity release. It is best to approach us or an independent mortgage advisor with some knowledge on what type of mortgages you can obtain.
Don’t forget to establish a target tenant profile. Knowing what type of tenants that you will be targeting can provide you with the pros and cons, which are essential for marketing purposes and changes to the property. You might be aiming towards a student, which will influence your choice of location, furniture and rent charged. You might want to aim for an easy to clean property. If they are young professionals, you might want to make sure the property is modern looking and stylish, as this will provide you with a unique selling point.
Despite the significant changes last year, it is still beneficial investing in properties due to them being physical assets, and that limits the impact against inflation.