Not knowing what to look for when buying a rental property could be a scary thought and in this guide we go through everything you need to know before purchasing a property. Generally, property can be a great source of income and cash flow, however, without proper due diligence, it could turn out to be nothing more than a headache. This guide will provide you with the simplest methodology and gives you the most important factors when it comes to investing in property.
How is a rental property defined?
Rental property is a property purchased with the intent to be rented out to a tenant who agrees to pay a certain amount (rent) per month for the privilege of living in the property. There are different types of property that are ideal for renters such as a normal buy to let property, properties managed on a short term let basis like serviced apartments and hotel rooms, student rooms, holiday lets and other categories which mainly fall under the above.
What do I need to do first?
To start your rental property purchase or any property purchase for that matter, you first need to set your goal. This means you need to have a clear idea of what you would want to do with the property, i.e. is it just to let out? and if so is it short term or long term tenancy you are after? Are you going to potentially sell the property in the future? These are some of the questions that need to be answered before going ahead with a purchase and our experts are ready to discuss that in more detail and give you the best possible advice for your circumstances.
What’s next?
Get yourself familiar with the terminology and function of terms and organisations. Some of the terms that you need to research on are as follows: Service charge, leasehold, freehold, ground rent, rent review, rent arrears, yield, ROI, land registry, tenancy, void period, stamp duty, capital gains, valuation and structural survey
What is good about investing in rental property?
The answer to this question is quite simple. Property is always a safe bet. Rental property would give you a cash flow income in rent as well as capital gains if you buy the right property. There is not any asset class in the globe that can provide you with both of these and also you are in charge of the destiny of the asset. Sure you can receive dividends from stocks but majority shareholders would decide the fate go the company.
What are the risks?
Cost of purchase (stamp duty and tax)
tax changes may affect profits
If not insured, returns could be affected
In case of a recession, the prices may drop which means a loss in capital gains, however, over a long term investment, the gains are always much much higher than losses as there is only limited space on earth and the population is growing.
What is the process?
The first step is to identify a property. Once the property is chosen for a certain goal, then we decide on method of purchase, i.e through a limited company, in personal name, with a mortgage or fully funded and once that is decided offer is made and at this point, surveyors are instructed to make sure the property does not have any unwanted surprises. If all of the above is ticked we can then move ahead and purchase the property.
Are you ready to be a landlord?
Before you purchase any rental property, you must do some research into laws of being a landlord in the UK. Some of the things you need to be aware of are your safety responsibilities like gas, fire and electrical safety as well as your duty with repairs of the property. If this all sounds taunting, do not worry as you can always hire a management company to take care of all of this for you for a portion of the monthly income.
Do you want to invest in the UK? Khashi Shahverdi the owner of Mason Verdi talk about whether you should buy a flat or a house In this video – https://youtu.be/AQ1x3FFTrbQ.
Mason Verdi is one of the fastest growing, property development & investment companies in the North-West UK. This company started life as sales agents and over the years has evolved into two arms of development and sales. Mason Verdi is a Liverpool based Property developer with track record in development in Liverpool and Manchester, northwest UK.
