Buying an investment property has been a very popular option for investors, and, as house prices continue to rise, the demand for rental properties is greater than ever. Buyers have a lot of choice as there are plenty of investment properties for sale UK and if you are able to invest in property, it can be a beneficial asset to have. However, it can be difficult to know where to start, so here is a guide to buying investment properties for sale in the UK.
Location
Before buying investment properties for sale UK, you should research the locations that you think are good. You should consider a number of factors such as the strength of the location, the rental yields in that area, the level of demand, and the potential for capital growth. It’s also important to look into areas that have a proven track record for investment success and that have positive predictions for price growth.
When buying investment properties for sale in the UK, you should consider a number of factors, the most important of which is the type of tenant you want. Who do you consider to be an ‘ideal’ tenant? This decision will help you determine the type of property you purchase and the location in which you intend to invest.
For example, it will impact whether you want to purchase a house or flat, and whether you purchase in an urban or rural area, depending on whether you prefer a young professional or a family. In case you want to rent out the property to a professional, consider whether there are good transport links in the area. But if you are considering a family as your tenant, you should consider a number of factors such as schools, hospitals, shopping malls etc. Checking for properties within the catchment area of good schools might be a smart idea for family tenants.
Type of property
Once you’ve decided on the location in which you want to find investment properties for sale, you can start considering any of the investment properties for sale in the UK that are available at reasonable prices.
Off-Plan Properties – This includes purchasing a property before it is fully completed, meaning that the property is still in the planning or development stages. This offers a lot of opportunities as there is a lot of potential for capital growth, lower costs, and the appeal for a new build property. These investment properties for sale in the UK are also often offered to buyers at a lower price in order to attract investors.
Refurbished Property – These investment properties for sale in the UK are typically historical or period properties that have been refurbished according to modern standards. These can be attractive to those investors who look for traditional properties but want to refurbish them according to their choice.
Residential Property – These kinds of properties are in demand because as house prices continue to rise, beginners continue to struggle to set foot on the property ladder and so they have to rent for longer periods of time.
Student Property – As the number of students heading to universities continues to grow over time, so is the demand for student rentals. In the case of student properties, the rent is also higher than it was a few years ago, so investing in student properties offers a good opportunity to potential investors as rental yields are rising. Moreover, students may be good renters compared with other tenants as they respect their landlord and consider them to be an authority figure. In case you are considering renting out your property to students, you should ensure that the investment properties for sale in the UK have good transport links and located close to the University/City Centre.
Buy to let mortgages
If you are looking to invest in a house or flat, you may be eligible for a ‘Buy to Let’ mortgage. However, there are a few conditions to these mortgages, and you must know and understand the risks involved in these types of mortgages. In order to be able to afford to take them, you must have a good credit history and own your own home, and you should have an earning of over £25,000 a year.
However, these loans tend to be more expensive as they have a higher interest rate and require a larger deposit. Similar to a mortgage for buying a house for yourself, there are a variety of different options for taking a buy to let mortgage.
Fixed-rate mortgage
Buy to let mortgages are only usually for 2-3 years. The mortgage rate is fixed for a certain period of time, regardless of whether the lender’s standard variable rate (SVR) changes or not. Once the fixed term is over, the mortgage will be transferred over to a Variable Rate Mortgage, which uses the lender’s SVR to track your interest rate.
Standard variable rate mortgage
This particular mortgage is dependent on the interest rate since it is based on the lender’s SVR. As it does not involve any deals or discounts, it is a more expensive option for clearing your mortgage.
Tracker-rate mortgage
In the case of a tracker-rate mortgage, the interest rate tracks the bank rate, which is set by the BoE. It tracks the rate by a particular margin, so this type of mortgage rate tends to change, meaning that the interest rate is likely to change. When the agreed time frame comes to an end, you’ll likely be transferred over to an SVR mortgage.
Interest-only mortgage
This mortgage allows the borrower to pay off only the interest and not the capital till the end of the mortgage term which is usually 20-30 years. The borrower is expected to pay off the loan at the end of this time frame. This is one of the most common types of mortgage which is popular among buy to let investors. However, you should be able to pay off the loan in total at the end of the required time period.
The maximum amount you can borrow when buying investment properties for sale in the UK is linked to the amount of rental income that you expect to receive. Lenders typically require the rental income to be 20-30% higher than your mortgage payment.
