The UK property marketplace is in a good position. Despite the economic uncertainty experienced in recent years, the market has now fully recovered and returned to growth. 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 available housing supply, this is still a good time to be a landlord. UK house prices are rising and rents are stronger than ever before, with more growth forecast in the future.
So, what are the best ways to build your property portfolio in 2024? Read on to find out our key principles for buying new investment properties.
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 Hull.
These properties are ideal for overnight stays, international students and business travellers, and are often listed for far higher rents than long-term residential lets.
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 according to Savills, and rental growth remains on track.
Developments like Berkeley Square on the Manchester waterfront offer a great option in one of the UK’s most reliable and high growth housing markets.
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.
Manchester is a fantastic example of a city which has all of these and is well known as one of the best investment markets in the UK.
Where is the best place in Manchester to invest in buy to let property? Find out here.
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 previously, 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 could help you create a healthy balance which will lead to success. Learn more about the advantages of short-term lets by clicking here.
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 the relatively high mortgage rates we are currently experiencing. While mortgage rates are falling, experts think they could fall further in 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 twice the benefit.
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 2024.
Want to learn more about how to build your property portfolio in 2024? Get in touch with the team today to find out more and discuss our available opportunities by clicking here >>
