The UK property marketplace is in a good position. Despite economic uncertainty, investors from around the world are still seeing immediate and long-term value in the market and are looking to make the most of it.
With a lack of supply, this is still a good time to be a landlord. UK house prices are set to rise in the coming five-year period, and rents are stronger than ever before.
So, what are the best ways to build your property portfolio in 2023? Read on to find out our key principles for buying new investment properties – and what’s more, most also apply to anyone looking to buy their first home!
Understanding the costs involved
Before you look at buying a new property to build your portfolio, it is extremely important that you understand the costs involved. These include the initial costs of the purchase including the mortgage and other fees related to the initial investment, including:
- Mortgage repayment rate
- Solicitor and other legal fees
- Stamp Duty (if applicable)
Then there are the ongoing fees which will continue following your investment, including:
- Letting and property management fees
- Maintenance costs
- Ground rent
- Income Tax and Capital Gains Tax
- Landlord insurance
When buying a home, there is a lot more to it than simply paying the cost of the property itself. It will pay dividends to make sure you are aware of these costs before you start.
Define your goals
Once you have got a good understanding of the costs involved in building your property portfolio, you should define your goals. What do you want to get out of investing? A portfolio geared around long-term capital growth will look very different from one that is designed to achieve the highest short-term rental income possible.
Some key questions to ask yourself are:
- How quickly do you need or want to see a return?
- How long do you intend to keep your properties for before exiting?
- What do you need the money for? A future retirement? Some extra cash?
- Do you want long-term or short-term lets?
- What kind of property do you want? Single apartments? HMOs?
Once you have the answers to these questions, you can begin to plan your portfolio accordingly. To give an example of what we mean, consider the following two scenarios.
Firstly, you have decided that immediate rental income is most important to you and is what will allow you to meet your business goals. This means that you could look at short-term let properties in high-volume tourist areas such as City Gate in York. These properties are ideal for overnight stays, international students and business travellers, and are often listed for far higher rents than a long-term residential let is. There is a greater level of uncertainty in the market, but the potential rental rewards are much higher.
On the other hand, a second scenario sees you looking for long-term capital growth and rental stability as you save ahead of retirement. UK house prices are set to increase again over the next five years, and rental growth remains on track. While it will not provide the potential for blockbuster rents like a well located short-term let, the eventual rewards are likely to be just as significant and far more predictable. In this case, you could look at a development like Urban Green in Manchester, one of the UK’s most reliable and high growth housing markets.
As you can see, your priorities will direct you to different markets and different types of investment. By defining your goals at the outset, you can give yourself the best chance of finding the right property to fit them.
Find the right location
Finding the right place to invest is the next step. You want to buy somewhere with high tenant demand, a shortage of property, a growing economy and good infrastructure. All of these factors in one place are a recipe for success for any investor, but especially for the first-time investor.
Take Manchester as an example. Rents in the city grew rapidly in 2022, and the latest data from Alliance City Living demonstrates how strong the Manchester rental market continues to be a great place to invest.
Rents for studios and three-bedroom apartments in Manchester reached record highs during Q4 2022, increasing year-on-year rents by 21.9% on average. Average asking rents for one- and two-bedroom apartments in Manchester also achieved close to record highs of £1,009 pcm and £1,334 respectively by the end of the year.
Want to buy an apartment in Manchester? Click here to get in touch with the team and find out more today >>
Consider diversification
A great tip to build your property portfolio in 2023 is to diversify it. With ongoing uncertainty in the wider economy, investing in different types of property can act as a useful security measure for you. A wide variety of investments will allow you to make the most of any market condition that arises.
If you have a portfolio full of similar sized properties you could get one of a different size that would appeal to different people. For example, three-bed apartments are increasingly rare and are highly valued by tenants. Learn more about what makes these apartments such a good investment by clicking here.
Finally, you could even try a different type of let entirely. As mentioned earlier, short-term lets offer a whole range of advantages for some investors over the more traditional buy to let model. While they are not for everyone, adding some to your portfolio in 2023 could help you create a healthy balance which will lead to success. Learn more about the advantages of short-term lets by clicking here.
Choose a lettings and management agent
Once you have invested, it is time to consider how to let and manage the property. Doing so yourself will take a lot of time and may not be worthwhile. There are many different elements to the job, including:
- Administration and contracts
- Marketing your property
- Undertaking viewings
- Annual fire, gas, electrical safety checks
- Maintenance and repairs
- Inspections
- Inventories
That is a lot of potentially stressful work, and it is no surprise that so many landlords choose to outsource it to a professional lettings and property management agency. A company like Alliance City Living is perfect for taking care of this side of investing on your behalf.
For a small monthly percentage of the rental income, you can have all the benefits of being a landlord with none of the hassle. Searching for the right letting agent requires due diligence, but most developers can recommend a good one
Look at off-plan properties for an easy win
By investing off-plan – while a development is still in construction – you can get a property at its lowest possible price and avoid the higher mortgage rates we are currently experiencing. Instead, buying off-plan means you will be able to get a mortgage at the much cheaper rates which are forecast to arrive over the coming years.
This approach offers the best of both worlds and a potential path to earning more while spending less. What’s more, if you buy in cash now, you could choose to remortgage in future when the rates fall – another method of getting the benefits at both ends of the process while avoiding any current economic hardships.
There is always a lot to consider when investing in property, but by following the tips in this guide, you will have the best chance of building a strong portfolio in 2023.
Want to learn more about how to build your property portfolio in 2023? Get in touch with the team today to find out more and discuss our available opportunities by clicking here >>
