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Should you invest in property right now?

2010 at 06:56 by Liz Hodgkinson

If you have some spare cash or are considering downsizing, is now a good time to invest in property?

Fears about capital gains and VAT rises, plus the continuing uncertainty of the property market, has understandably made people very jittery about risking large sums of money on bricks and mortar investments, both in the UK and abroad.

At the same time, the internet is littered with apparently wonderful bargains: Buy a Caribbean hideaway for just £1 down; come to our free distressed property seminar; make a guaranteed 20% profit every year, are examples of the kind of offers and promises you now see.

My advice is: take no notice of any of them and do your own research. Never, ever rely on an internet ad to lead you to a fantastic bargain. The point about investing in property at this moment is that it can give you a reasonable, although not spectacular return which is probably better than anything you can get at the bank.

But investing in property is not without risk and it is by no means hassle-free. At present, the only way to make money from property is by renting it out. You cannot hope for capital gain; or, at least, you cannot rely on it. As such, you need to concentrate entirely on the achievable yield – what you can get now, not at some indefinite time in the future.

And before buying anything at all, you have to number-crunch very carefully indeed, taking into account all the worst possible figures. HIPS have disappeared, thank goodness, but there are still many costs involved in buying and running an investment property (or any property come to that). These may include: survey,  mortgage costs,legal costs, utilities, furnishings, maintenance and repair, insurance, service charges (if a flat or apartment); council tax, letting agents’ fees, phone calls and transport to visit the property, cleaning, gardening – it goes on and on and never stops.

There are endless certificates now needed for rental properties, and these all cost. Gas certificates, for instance, have to be renewed yearly. Deposits have to be ‘protected’.  All properties need an Energy Performance Certificate, and letting agents will not now handle homes without one.

At the same time as certificates and legal requirements proliferate, rents have not gone up significantly for at least 10 years. Then all tenants imagine they can bargain and negotiate; they know that there are a lot of properties out there and many landlords competing for tenants.

And what  if your wonderful property simply won’t rent out?  There are never any guarantees. If it stands empty, you will be stung for full council tax as well as having to pay for all utilities in the meantime. Plus your mortgage, if you have one.

Then you have to ask yourself whether you can actually handle being a landlord. The landlord/tenant relationship can be a difficult and delicate one, and you really do need considerable people skills, and a pleasant personality, to make it work. You have to consider how you would react if your tenant stops paying rent, trashes the place, brings in a dog when pets are expressly forbidden, or plays loud music which annoys the neighbours.

Yes, there are many downsides but there are upsides as well. If you get it right, and the numbers work out to give you a profit over and above your costs, you will be providing a much-needed service, and making your money work harder than if you just donate it to usurious banks. I have been a landlord for over 15 years and am currently renting out four properties; two in Worthing, one in Oxford and one in London. The properties are all immaculate, and the tenants are very happy there.

I usually try to meet them at the start of the tenancy, I provide them with a detailed inventory, a file full of instructions for the cooker, dishwasher, boiler and so on, and once I’m assured they are OK in the property and know how everything works, I leave them severely alone.

The best tip I can offer for anybody considering investing in rental property right now is to visit several estate agents’ offices in the area you have earmarked, and ask what is popular, what is hanging around, and what the average rents are. Do this BEFORE going to view any properties.

And – of course you can get my book, the fifth edition of The Complete Guide to Investing in Property, for the full picture.  

 
 

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