One of the most popular strategies for investors in the UK is buying an apartment for rent. Investing in the London real estate is a reliable and liquid investment that brings income from renting and subsequent resale.
One of the main reasons why this investment strategy is attractive, is the low interest on a mortgage.
The main difference between the UK real estate market from many other countries is the lack of free land for construction. This reflects on that the prices in a majority of UK cities double every 10 years. And guarantees to investors that the effect of the "economic bubble" that was observed in the United Arab Emirates and some other countries are excluded in the UK. The cost of rent for real estate is also continually rising up. According to the National Housing Federation research, the rental price has increased by 30% since 2015, and the next five years will increase by at least 20%
A lot of overseas investors do not know how to start to earn a steady passive income and to grow their UK property portfolio. They don't have realized what potential income from rent can be achieved, they do not understand the process, UK laws and regulations, and how they can manage the costs.
Investigating the questions of investing in British property opens many specific issues which sometimes takes the bulk of the time to understand.
But, you can get great income by renting out your property and minimizing the period it is vacant. For this you should:
- Determine the realistically achievable rental income and frequency of income generation.
- Plan in advance your cash flow.
- Determine the list of expenditure and monitor those to be paid on time
- Understand the effect of your tax status and budget your tax payments in advance. The legislation defines a list of expenses that can be deducted from the taxable income depending on whether the owner of the residential property is an individual or a legal entity and whether they are a tax resident in the UK or not.
- Decide whether you will have time and skills to manage the property yourselves or hire a professional manager of your property who has relevant working experience in the real estate market in London.
Why do we think majority investors will consider leaving all the issues to a professional property manager? There are three primary functions that they will fulfill. Firstly, your property manager will take control of all the problems related to compliance and requirements of the law. Secondly, they will cover all the technical formalities, prepare your property for the tenants, ensure all the checks on the tenants have been successfully completed and contracts are signed. And finally, they will competently minimize your costs and maximize your income from your rent.
The main point is that the laws are regularly updated. An experienced specialist will keep on eye on all the coming changes. For example, what peculiarities and laws exist when registering and managing tenant's deposit. What rules need to be considered in line with the avoidance of tenant's discrimination, how the landlord can verify that the tenant has the right to rent residential property, how to check the financial position of the tenant, and what references need to be obtained, etc.
The technical side of the process of managing a residential property hides a lot of essential details, and there is a lot of work to be done, such as:
- Service charge and ground rent payments
- Registration and payment of utility bills and Council tax
- Tenant's pre-checks. Perhaps this is one of the most critical issue because if the tenant stops paying rent, the landlord will immediately incur a substantial material loss.
- UK Non-Resident Landlord Scheme Registration with HMRC and their further regular notification
- Interaction with tenants during the tenancy term
- Preparation of the apartment before tenants will move in
- Drafting of the tenancy agreement
- Arranging professional check-in, inventoty, and check-out reports
- Accounting and tax reporting, etc.
An experienced property manager will help you to save time and money and will maximize your profits.
If you want to know more how we helped hundreds of foreign investors to build their London real estate portfolio, contact UK Property Advisors on +44 (0) 755 310 9657. We are a reliable partner and an expert in residential real estate investments in London.