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Market Updates

What to look for in a buy-to-let property

Buy-to-let properties can be a very attractive investment, but for it to be successful, interested investors should understand precisely how it works and what’s involved in the buy-to-let property purchase and maintenance. An even more crucial aspect is understanding how to choose the right buy-to-let property to maximise your return on investment. Below, we will explain what a basic buy-to-let strategy looks like and share seven tips on what to look for in the buy-to-let property to ensure your property investment success! 

What is a buy-to-let property?

A buy-to-let property is a property you buy, intending to let it out to tenants and generate an income from renting it out. A very simplified process looks like this: 

  1. An investor purchases a buy-to-let property.
  2. The investor finds a tenant for the property.
  3. Investor, now a landlord, receives a return on investment through rental income. 

Quite often, people who purchase a property intending to rent it use the monthly rental income to cover their monthly mortgage repayments, in reality, only investing the mortgage down-payment. When the property’s value increases over time, the investor can then sell it for a higher amount than the original price, profiting from the overall transaction.

What to look for in a buy-to-let property

1. Property cost vs your budget 

The first step is to look at how much money you can afford to invest, both in the form of downpayment and if required,  to decorate or refurbish the property. Take into consideration all other potential expenditures, such as taxes and legal fees which should all be accounted for in the initial budget. Compare this to the investment property prices, and assume you may need approximately 30% down payment before securing a buy-to-let mortgage.  

Think of your buy-to-let mortgage payments in times when the property is not occupied, and as a general rule it is wise to have three months of mortgage payments in reserve to allow for times when the property is not let.  Also, take into account that general changes in interest rates might influence your mortgage rates and cost. 

2. Location 

Properties located either in the city centre, near transportation links, or in areas undergoing regeneration and with plenty of work opportunities have a higher chance of getting the best rental rates and being in general demand. The location also plays a role when you look at your real estate investment from the capital appreciation point of view.  

3. Projected rental yield

Rental yield is a measure of how much income your property will generate for you annually as a percentage of the property’s value. One way to research it is to look at one of the popular renting websites in the location you are interested in and see the rental values for similar properties that you are interested in there. Based on that you can calculate your projected rental yield: Annual Rental Income/ Property Purchase Value. For more information on rental yield, please see our basic buy-to-let strategy guide. 

4. Have tenants in mind or research the rental demand 

Who would you like to rent your property to? Students, young professionals, families? Based on that, you can choose the size and location of your investment property. For example, if you would like to tap into the student let market, a property near or with good transportation to the education centres would be a good bet. However, it is also important to not be too emotional about who rents the property. Lettings agents will vet any potential tenant ensuring that they have the resources to pay.

Lifestyle Property Blog Young Tenants

5. Buy-to-let property interior 

Depending on what your ideal tenants are, you should adjust the property interiors, too, and this mainly relates to whether to rent the property furnished or unfurnished.  While, of course, having a nice interior design will increase the chances of your property being rented out, spending huge amounts of your budget on the latest designer materials might in the hope to get a higher rent might not pay off. Keep the interior functional and pleasant to the eye and easy to fix and replace in case of any damages.  

6. Building amenities and maintenance

As much as the property’s interior, the exterior, and overall appearance and convenience are important renting factors. Nice looking buildings, with on-site gyms or concierge service and shared spaces where tenants can relax, can be especially attractive to rent out although they may also command higher service charges which also needs to be taken into account.

7. Property appreciation rate in the location/exit strategy in the future 

While rental income might be your immediate goal, often people buy rental properties intending to sell them in the future for a profit. A good starting point here is to analyse the housing market of the location you want to purchase your property. Historical data can show you how fast (or slow) property prices rise in the area and by how much. Based on that, you can assume how much the property may be sold for in the future (add inflation rates to your calculation). Over time property tends to be one of the highest performing asset classes and as such makes it a very popular investment. 

Other considerations when purchasing a buy-to-let property

As with any investment, buy-to-let investment comes with certain considerations that any potential investor should be aware of. Apart from the obvious costs, such as the cost 

Investment risk 

As with any investment, there is an associated risk when buying a buy-to-let property. You might have overestimated the rental income you can generate or have no luck finding tenants, and these are just two examples of how this can affect your investment return. 

Cash savings to pay the mortgage 

In relation to the above point, a smart move would be to ensure you have enough cash savings or another source of income to cover the mortgage in a citation where there might be no tenants to cover these costs. This was touched upon above and we recommend having a reserve of three months of mortgage payments to cover any voids.

Taxes 

Depending on where your investment property is located, you might be exposed to certain types of property taxes, such as stamp duty land tax, that you should research and see if it fits into your budget. You might also be charged additional tax on the rental income and capital gains tax when you decide to sell your property. 

Obligations 

Usually, landlords are responsible for repairs and maintenance, such as electrical problems, water pipes fixing etc. Bear in mind that these may be expensive repairs, and you should budget for any unexpected repairs. New build properties in the UK come with 10-year structural warranties which can give some peace of mind to potential purchasers.

Other fees 

In the process of purchasing any property, there is usually a solicitor involved who is responsible for the conveyancing. Additionally, you may want to order a property inspection survey before buying it to ensure there are no issues with it. If you decide to hire a letting agent to manage the property rental, you should account for his or her fees, which depending on the country or even agent, may range between 10% to 20% of the monthly rental price. 

Summary of what to look in a buy-to-let property 

What might initially seem like straightforward property investment, there are many factors that could potentially influence your buy to let success and make the investment process harder than it may initially have been expected. 

You can also consider working with experienced investment property advisors, such as our team at Lifestyle Property International. Our services include sourcing properties from the most renowned developers in the UK, Australia, Portugal and Germany, that have a successful track record of rentability and capital appreciation over time. We also research the housing markets and the properties themselves to ensure that the property investments we offer will bring the best results to our clients. For more information, please contact us today.  

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Market Updates

Canberra property investment and Australian housing market overview

Ranked as the world’s most liveable city, Canberra is a safe, friendly, convenient and multicultural environment to study, work and live. As the national capital, Canberra is not just the seat of government, it is also home to some of the most impressive national establishments, cultural attractions, research and academic institutes. This article is for those looking to buy or invest in Canberra properties, as it introduces the city’s features and talks in detail about Australia’s and Canberra property investment. 

Canberra property investment overview: About Canberra

Canberra was established and designed as a garden city in 1913. It is a city of unspoilt nature reserves, contemporary dynamic urban spaces and bustling precincts with seamless integration of developed and natural elements. With a population of 426 000 people, Canberra is Australia’s 8th largest city, providing all the excitement and advantages of city living, without the traffic, pollution and stress of other Australian cities.

Canberra, Australia’s Capital Territory (ACT)
Canberra, Australia’s Capital Territory (ACT)

Efficient transportation network

In Canberra, residents spend less time commuting and more time living – the new light rail network is part of an integrated and connected public transport system which makes getting around easy and quick. By car, everything is within a 30-minute drive. There are also multiple choices for leisure facilities, Australia’s highest mountains and ski slopes, pristine beaches, vast bush landscapes and other big cities are only a few hours’ drive away.

Australia’s housing market is growing

The momentum continued to build across Australian housing markets in February 2021 as values rose at the fastest rate in 17 years. According to Corelogic, national property values in Australia surged 2.1% higher in February – the largest month on month rise since August 2003 due to record-low mortgage rates, improving economic conditions, government incentives and lower supply levels. Australia’s housing market is trending very positively, with prices rising across each of the capital cities in a growth phase not seen since 2009-2010 when post-global financial crisis stimulus fuelled the demand.

Canberra’s economy is stable and rising

Canberra has one of Australia’s most resilient economies with the highest average income and lowest unemployment in the nation. There are one million-plus people in the ACT region, and the population growth is 1.9%, the fastest in Australia. 35% of Canberra residents were born overseas. Canberra has the highest average income, the highest level of education, the most substantial jobs growth and the lowest unemployment in Australia, and one of the world’s safest cities, with very low crime rates.

Canberra

Innovation city 

It is a place to be for innovators, technologists and entrepreneurs and as the centre of government, Canberra provides opportunities for innovative policymaking and start-up development. The University of Canberra and the Australian National University, and other world-ranking research and tertiary institutions offer access to the brightest researchers and academics.

There are several key growth industries in Canberra renewable energy (100% renewable energy powers the city aiming to reach zero emissions by 2045), health and sport science, space science, information technology and cybersecurity, agricultural technology and environmental sciences. 

Major employers based in Canberra include: 

  • ANZ Bank and Commonwealth Bank of Australia; 
  • Accenture, Deloitte;
  • Hewlett Packard Enterprise, IBM;
  • KPMG, PWC;
  • Australian Government Department of Defence, ACT Education Directorate, Planning & Land Authority, Public Service Treasury Directorate, Australian Taxation Office, Commonwealth Scientific & Industrial Research Organisation.

As a major employment hub, investors looking to buy-to-let in Canberra can estimate that there is and will be a strong demand for renting apartments, be in the city centre, or in Canberra suburbs. 

Canberra’s lifestyle

Canberra is a progressive, vibrant and beautiful place to live. No matter what your interests are, there is plenty of entertainment. All you need for a comfortable life is within easy reach. You are only ever 30 minutes’ drive from the city, and each of the suburban town centres is bustling with cafes, shops and services.

Much more than just Australia’s capital, Canberra was ranked 3rd best city to visit in Lonely Planet’s Best in Travel 2018 and the OECD World’s most liveable city in 2014. Canberra is a beautiful place to explore and has an easy lifestyle and a strong community vibe.

Canberra has a great variety of bars, clubs and pubs and many sporting venues. Canberra is home to 7 National Sporting Teams, and the UNSW Manuka Oval is the home of International Cricket and AFL games. With 58 Museums and Galleries in the ACT region, there is always something to visit.

Canberra is a great place to live
Canberra is a great place to live

Canberra is just a short drive from stunning coastlines, national parks and world-class ski fields when an escape is needed. Living in Canberra gives you easy access to the picturesque Brindabella Mountains to the west, Sydney, an easy three-hour drive to our north, world-class ski-fields to the south and a stunning coastline two hours east. The region is also famous for its vast selection of vineyards, with 140 vineyards within 35 minutes from the Canberra CBD.

Global transportation centre

Transport options have never been more accessible for residents in Canberra. From the city, it only takes only 30 minutes to Canberra International Airport with 800 flights per week to all Australian cities and internationally in normal times. While right now, travel is restricted, Canberra is normally connected to the world by 14 international flights each week. It is less than two hours by plane from eastern Australian cities like Sydney, with multiple flights and daily flights to Adelaide, Brisbane and Perth.

Australian housing market: A positive outlook

From the graph below, Canberra has the second-lowest vacancy rate in the country and also the highest apartment Gross Rental Yield amongst all capital cities. With the 0% foreign ownership surcharge on stamp duty, it is the most attractive capital city for overseas investors, and the stamp duty is claimable for the buyers. With a stable population and labour force growth trends, it is an excellent city to invest in.

See also the average monthly asking rental values for city apartments in the table below. Canberra rents have been stable, unlike Sydney and Melbourne and actually increased slightly during 2020.

AU asking rental values
Asking rental values in Australia

House prices forecast in Australia 

Going forward, see also the current forecasts for 2021. Commonwealth Bank says Australian property prices have held up better than expected and should rebound strongly in the second half of 2021.

Canberra and Australia House Pricing Forecast
Canberra and Australia House Pricing Forecast

Is now a good time to invest in a property in Canberra?

Canberra’s housing market has navigated the Covid 19 period with hardly any disruption. The strong public service employment base has resulted in minor job losses compared to those seen in the private sector. Canberra has been better placed economically, buoyed by the public sector and industries reliant on government spending. 

Housing values have been rising for 19 months in a row, and the quarterly trend in home sales is 4.2% higher than a year ago, demonstrating a lift in demand while advertised supply levels have dropped by 31% relative to last year. Market conditions have pushed housing prices 11.3% higher over the past year, while apartment values increased 5.2% across Canberra’s sub-regions.

Canberra has been one of the top-performing capital cities in Australia for property investment. According to Allhomes’ research on Canberra’ property market, house prices have increased by 300% since the year 2000, and apartment values have increased by 190 % over the period. The Canberra property market is a unique, stable, and positive one and certainly worth considering for long-term capital growth and rental yields.

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About Us

Lifestyle Property is a group of highly experienced real estate consultants and agents dedicated to advising clients on all aspects of the property market, including sourcing property for investment, mortgage broking, connecting clients with rental agents and even visa-by-investment specialists. The group’s mission to break the mould of the industry standard and redefine the clients’ view of real estate brokers in general.

At LFS Property we do not sell property, we advise clients on the property. We will do our own in-depth due diligence on each property sale and then advise the client as to whether or not it is a good bad purchase/investment opportunity. We can offer this service free to all those clients who use us as their appointed agents to source them the home they require.

We also provide a sound rentals service for owners and tenants alike. If you are new to the city of Bangkok or Hong Kong, please tell us what it is you are looking for in your home and we will suggest the areas, towers, estates etc that will best suit your lifestyle. Check our websites below:

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Real Estate Knowledge

Birmingham – a city that quietly becomes UK’s buy-to-let hottest location

Birmingham has been on the mind and mouth of investors interested in buy-to-let properties in the UK for several years. Known for its high quality of life, with the benefit of a 60% lower cost of living than in London, the overall city’s growth and development makes Birmingham an exciting property investment location.

With banks, investment firms, MedTech companies and even SME’s moving their offices and operations there, so are the UK’s young professionals. While already being West Midland’s biggest communication hub, HS2 fast rail that is being built will link Birmingham to Lonon in 45 minutes, only increasing the city’s status on the UK’s map.

Read on our 5 top reasons to invest in Birmingham properties in 2021 to get a complete overview of the city’s investment potential.

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Market Updates

UK house prices rise nearly 5% despite political turmoil

Average UK property price rose 4.7% last year adding about £3,300 to the cost of buying a typical home but London growth slows markedly.

Growth in UK house prices has slowed but remains close to 5%, with faster growth seen outside London, according to official data.

House prices across the country increased 4.7% in the year to May, hitting an average of £220,713, the Office for National Statistics (ONS) said. The annual rate fell from 5.3% in April. Between April and May, prices were up 0.5%.

House values rose in all regions, with the east of England still growing at the highest annual rate, of 7.5%, followed by the east Midlands at 7.2%.

Analysts at Jefferies said: “Despite the election and consistent doom-mongering, we note that house prices continue to increase.”

The north-east registered the slowest annual growth, of 1.6%, followed by London at 3%. Prices in the capital are still more than twice as high as the UK average, at £481,345.

The most expensive borough to live in was Kensington and Chelsea, in west London, where the average property cost £1.5m. In Burnley, Lancashire, the average house cost £78,000.

James Allen, head of alternative investments at financial services firm Walker Crips, said: “It is clear that prime London may as well be a different country.” He added that buyers in Kensington and Chelsea would need a deposit of £450,000, based on a mortgage at 70% loan to value.

“For a one-salary household, gross income would have to be £222,000. The number of people in the UK earning more than £200,000 is estimated to be 235,000 or 0.7%. When such a small proportion of the population can afford to live in a borough, demand must be coming from other quarters, namely foreign buyers.”

Annual price change for UK by country over the past five years Photograph: ONS/Land Registry

The ONS uses data from the Land Registry. Its annual house price growth has slowed since mid-2016 but remains faster than the 2-3% growth reported by major mortgage lenders Halifax and Nationwide in recent months. Analysts believe that a fresh slowdown is under way.

Samuel Tombs of consultancy Pantheon Macroeconomics is predicting that annual price growth will slow to 1.5% by the end of the year.

He argued: “Lenders are reporting that they will lend less in the third quarter and the recent pickup in wholesale funding costs suggests that they will not continue to cut mortgage rates. Meanwhile, the recent deterioration in consumer confidence, largely in response to the intensifying squeeze on real incomes, has made households less willing to make big ticket purchases.”

The number of homes sold in the UK slumped 41% year-on-year in March, largely because the March 2016 figure was boosted by buyers rushing to complete before stamp duty changes the following month, the ONS said. In London, transactions fell even further, by 57% (and 62% in inner London).

The housing slowdown means that the average home in Britain has increased just over £3,000 in value (or £16.79 a day) since the start of the year, according to analysis by Zoopla. The property website found the typical home was valued at £304,469 as of 30 June, £3,309 more than in January. By contrast, the average property value increased by £13,852 in the same period last year.

Belper in Derbyshire, Hove in East Sussex, Todmorden in West Yorkshire, Woodbridge and Sudbury in Suffolk are the towns that have seen the fastest house price growth since January, between 6.6% and 7.4%, according to Zoopla. Bexley and Swanley in Kent, Langport in Somerset, Worcester Park in south-west London and Holyhead in Anglesey round out the top 10 property hotspots, with price growth of more than 6%.

However, values vary widely among the hotspots, from £152,840 in Todmorden to £492,850 in Worcester Park.

Richmond in North Yorkshire, Leatherhead and Walton-on-Thames in Surrey, and Altrincham in Manchester were identified as coldspots, with the biggest percentage falls in values – at around 5%. Pwllheli in Gwynedd, Weybridge in Surrey, Southwell in Nottinghamshire, Ellesmere Port in Cheshire, Burnley and Pontefract in West Yorkshire have also seen prices fall since January, by more than 4%.

Doug Crawford, chief executive of conveyancing website My Home Move, said that despite the slight slowdown, “the housing market is still simmering away nicely. Even though the overall growth rate has fallen, for first time buyers the slower rate of house price growth will be welcome, particularly with inflation running ahead of wages for many.”

However, recent research conducted by his firm found that average deposits climbed to £6,000 in the last year, with increases in some regions of more than 30%.

Anne Baxendale of housing charity Shelter said: “While prices may be slowing in London, the idea of owning a home of your own is still just a fantasy for most people.

“The government needs to change the rules of the game by introducing a fresh, new way of building homes that brings down the colossal cost of land and gives more powers to communities to deliver the genuinely affordable, high-quality homes that ordinary families are crying out for.”

Rents are also going up. Private rents rose 1.8% in the year to June, the same rate as in the previous three months, according to an experimental rental housing index from the ONS. It shows rents rose 14.8% between January 2011 and June 2017, driven by London.