PROPERTY INVESTMENT

When thinking of an investment that will make you money, the financial gurus always advice to go for something you have a natural flare for. Reason is this; if you are already interested you will almost certainly without realisation have developed a level of expertise. If not, you will constantly be at the mercy of those who have, and they will run rings round you. For instance, whilst at university one of my core subjects was in computing, I had lots of friends in the same field, at the time of graduating from University computer was the latest thing in town, there were endless opportunities in the subject. I even worked in the computer field for over 6 years. But yet to invest in the computer world was a problem. Why? It was not natural for me. Yet many made their fortunes through the same subject.
Whenever I picked up a book on computers I had to struggle to keep awake, although I had all the computer qualifications and expertise, I realised that I had to read a subject about three or four times before it registers. The problem was I forget such subjects easily. Why? Lack of interest. It would have been a financial disaster for me to invest money in the subject. Talk about stocks and shares; I would rather leave my money in a savings account. Why? It’s another subject in which I have no natural flare for, so I stare clear of them. Yet there are people who have made their fortunes and will continue to make fortunes through the same subject.
If you would rather see what you are getting for your money, you might want to consider investing some in bricks and mortar. Bricks and mortar is seen as the more shrewd investment rather than the vulnerable stocks and shares.

PROPERTY INVESTMENTS

On the subject property, my attitude and risk have always been different; I have always been fascinated by houses and homes, I will read any subject on property, I am fascinated by the word Estate Agents always peering into their windows. I knew every Estate Agent manager, even though most of them do not know me. I can even describe what every window display looks like. I knew every estate agent in my local area both old and new. I was always calling Estate Agents to view a property, I will attend any seminar even attended DIY workshops at the local B& Q store

GOING FOR WHAT YOU KNOW

Like myself many property investors started by buying in areas well known to them. It makes sense to buy an investment property just around the corner from where you live for a number of reasons. Firstly if you have lived in an area for some time, you are you are likely to know the property price in that area and quickly determine whether a property is a bargain or not.
We advice would be potential landlords that if they do not know an area at all, it is best to leave it alone, until they are able to do some research.

From my experience the best studio flats and one bedroom flats were often to be found in 1930s, 50s, or 60s blocks, where such apartments were specifically designed, rather than being converted from small rooms. Such apartments tend to be more spacious with large windows and still displaying most of the original characters.
Character properties are more aesthetic, more upmarket and more appealing. When I started considering becoming a landlord, I said to myself it must be something I can live in, it must be something appealing and beautiful. With such an attitude you can hardly go wrong.

LOCATION LOCATION LOCATION. If you are new to property investment or are looking to add to your property portfolio, then, we can advise on strategies that will ensure your investment is maximised. It is often said that if you are new to buying investment properties, you may be unsure of the difference between a good and a bad location. Lettings expert says; Landlords always think they know what makes a good location, but in reality few of them do.

In my experience as a landlord I have come to the conclusion that most tenants are not interested in your gardens or garages, in most cases it is presentation, modernisation, location and more than often price convenience above all. To succeed as a property investor you must have potential tenants in mind, for example working tenants do not always look for a lovely thatched cottage with roses round the door, in most cases they want to be close to public transport and amenities and sometimes be no more than thirty minutes from their place of work.

LOCATION LOCATION LOCATION is the standard advice you consider first when buying an investment property. But can you live in it yourself? With investment properties the principal factors to be taken into account are different from those applying to your own home. We often come across investors who are willing to invest so little on a property and hoping for maximum return whilst the property is in a dilapidated state. Such investors often argue that since they are highly unlikely ever to live in the place themselves, why should they worry about whether they could bear to live in such properties? My answer to such investors is if they could not bear to live in it why should they expect someone else want to? The kind of thing that is likely to put you off will most probably put a potential tenant off as well.

KEEPING YOUR EYES ON THE MARKET

Buying rental properties should be seen as a medium to long term investment, the fact is that buying a property in a reasonable condition, you can be receiving income on it within months of purchase.
Recently, the rental market has been affected by the increase in the numbers of people buying investment properties. The effect of the increase in the number of landlords will be to force rent down. Whatever the current situation whether good or bad, the rental sector will never disappear, remember that in good area there are more tenants than there are properties. Before buying it is essential to establish whether there is a serious rental market in the particular area. But if you have a smart, clean property in a location where many people are always looking to rent, then the risk is that much less. And remember, what ever the gloom and doom there always have been and there will always be people looking for homes to rent. There are signs now that some small-time landlords are selling their properties, so the situation may not last for long

COSTS

At AOB ESTATE AGENTS we advice that before making an offer on a property, make sure you have familiarised your self with the initial cost as well as possible levies, service and maintenance costs. The possible cost to take into account when a buying a flat for instance starts with the purchasing cost; there will also be the annual service and maintenance charge on the property. Service and maintenance charge do vary depending on the property type, it’s location and property age. An ex-council flat could attract a fee as low as £200.00 a year whilst a more expensive flat could attract as much as £4,500.00 a year. Also note that the charges do vary from year to year. It might be a good practice to obtain the accounts for the past three years as well as details of likely charges in the near future on a property before exchanging contracts, service and maintenance charges always includes the building insurance and may include external redecoration, rewiring, repair of the lift. I personally stay away from blocks of flats, because they are likely to be affected by those charges.

Congratulations you have now finalised purchase of your investment property. It is now ready to be rented out after you have refurbished it. But what! There are still more costs to come, if the property contains a gas cooker or gas central heating, you must obtain a gas certificate once a year. It might initially save you money buying a property that those not have gas, thus avoiding the expense of getting the yearly gas certificate. Because gas is by far the best fuel for heating, most tenants would ask whether your property is centrally heated with gas. If your property isn’t it could take a little bit longer than normal to let the property and properties without gas central heating may be difficult to sell. Remember also that whilst your property is unoccupied you will be liable for the council tax payable at 50% of the going rate, all utilities including gas, electricity and water rates do not stop because you do not have a tenant.

Finding a tenant costs money whichever way you decide to let your property. Letting privately will cost you advertising either nationally or locally in newspapers, this sometimes may come to as much as six months commission that you pay a professional firm to deal with the letting. Do not forget that there will also be time spent showing the property. Other costs are obtaining Assured Shorthold Tenancy form, obtaining references from the prospective tenant’s bank, current employer and previous landlord
Using an agency might be considered safer and better because the proper checks are made, tenants are properly vetted, and you might get a higher rent than you anticipated. Professional letting agencies can reduce a lot of potential risks of unsatisfactory tenants, but note that they cannot cut them out altogether. Agencies fees do vary from agency to agency, most will charge 10 percent of the monthly rental income, payable upfront and throughout the period of the tenancy. Some agencies operate on a sliding scale, whereby the longer the tenant stays in the property the less commission you pay the agent. It is illegal to try and avoid paying the agent’s commission by telling the agent that a tenant has left. If this is proven otherwise the agent will be able to sue for unpaid commission. The agents will usually win.

Finally, do not forget the word Tax. No matter how hard you try the tax man will one day knock on your door! Net rental income is subject to tax at the marginal rate. Tax becomes payable where you are letting rooms in your house, you are an investment landlord, or are letting your home whilst abroad. Net income is the amount of money left after all expenses incurred have. Examples of expenses are letting fee, loan interest payments, refurbishment expenses whilst the place is let out, insurance, and VAT payments. A wear and tear of 10 per cent of the rent is available if the property was furnished. When you sell a property you will most certainly have to pay Capital Gains Tax, this is usually at 40 per cent of any profit made, or the capital gain. As with renting when you sell, you can claim all the costs incurred in the purchase for example legal fees, stamp duty, refurbishment cost, cost of furnishing etc capital Gains Tax is more complicated, but as a general rule you will have to pay CGT on any asset considered to be a capital sum which is not part of your income, ie your own home or principal private residence.

Recently the property market has slowed but there are still a lot of interest attracted, the key consideration when plunging into the market are choose your area carefully, work out your budget and stick to it, ensure you have the right insurance cover, be aware of forthcoming changes in government legislation, and be good landlord.