Property Investment In The UK

We live on an island with a limited supply of accommodation but an ever increasing population. The population is increasing due to factors such as - increasing birth rate and longer life expectancy.

With Brexit, there is a possibility we may not get as much immigration into the UK, as we have in the past. But, even if not another single person came to live in the UK, the population would still grow for the reasons I've already mentioned.

With a growing population and limited supply of accommodation, the long term trend for property prices and rental values is up.

Property investment in the UK is also a very safe for a political and legal point of view. The UK political system is fairly stable and your property ownership rights are well protected in law. You can own the freehold of the property. This means you own the property, the air above it and the land below it.

Banks are very happy to lend you money to invest in property. When you're getting a 'Buy-to-Let” (BTL) mortgage', which is a type of mortgage you get when you buy an investment property in the UK,  most banks want you to put down a deposit of 25% and then you borrow the remaining 75% from the bank.

This is usually where most people struggle with the concept of property investing in the UK. They feel that they only have a certain number of 25% deposits, and so they will only be able to buy a certain number of properties before they run out of deposit funds.

Whilst this is a genuine issue, there are many creative ways of property investing in the UK. This is where you don't actually have to use much of your own money. You can use other people's money to acquire investment property in the UK. There are also creative investment strategies such as Purchase Lease Options and Rent to Rent. This is where you don't actually buy the property, but you can get a cash flow from property assets you don't own.

One of the great things about property investing in the UK, is that there are plenty of major cities to choose to invest in. When you're buying property, it is important to buy property in an area where there is an increasing population.

What causes an increase in population? Jobs being created, hospitals and universities being extended - all of which attract people into the area and those people need accommodation.

The best property investment in the UK is to buy and invest in areas where the population is increasing at a faster rate than other areas. You will have higher demand for your rental properties. You should also get better capital appreciation compared to other areas of the country.

When you are buying investment property in the UK, you need to understand that the market is going to be cyclical. Prices don't always go up. They go up and they come down. Some people think that when prices come down they have lost money. This is not actually the case. When property prices fall, you only lose money if you have to sell. If you don't sell, you've not actually lost any money. As long as you can afford to hold the property whilst prices recover, you are not losing anything at all.

So if you're property investing in the UK, or anywhere in the world, there are 5 Golden Rules you need to follow. I explain these 5 Golden rules in detail in my book, Property Magic, but let me give you a very quick overview of these rules here:

The first Golden Rule is you want to buy from what we call motivated sellers. These are people who have some sort of property related problem, for whom the speed and certainty of a sale is more important than the amount of money they get. What this means for you, is that you can buy at a lower price, or get flexibility on the terms. The seller might agree to creative investing strategies, such as Purchase Lease Options (PLO) or Exchange Delayed Completion (EDC).

Golden Rule Number 2 is, you only ever want to buy in an area with strong rental demand. It's really important if the current tenants move out, there are other tenants who are happy to move in to the property and rent the property at a fair market rent. If you don't have tenants, that's called a void period, which means you have to cover the mortgage and all the costs. So it's really important to only buy in areas with strong rental demand.

This is linked to Golden Rule Number 3, which is you should only ever buy property that gives you positive cash flow. This means at the end of the month, when you bring all the rent in - you take off the mortgage, the insurance, the management, the maintenance, and anything else you've got to pay, and there should be some money left over, some profit available for you.

Golden Rule Number 4 is, we want to hold a property for the long term. As I said, property prices can go down as well as up. If you try and judge the market, you probably won't get it right. If you're holding your property investments for the long term, that's where you create the real wealth for your family and future generations.

You may have heard people say that with property investment in the UK, every 10 years property prices double. That's not strictly correct. The average over the last 60 years is that every 10 years, UK property prices have doubled. But, it's an average, it doesn't happen every 10 years.

Sometimes property prices can double in five or six years. Sometimes it might take 15 or 20 years, depending on when you buy in the market cycle. Again, trying to judge the property market is not the best thing to do, because you probably won’t get it right.

So plan to hold your UK property investments for the long term. You will even out any mistakes you have made. This is as long as you're making cash flow and can afford to hold your UK property investments. 

Then, Golden Rule Number 5 is, you want to have a cash buffer. Some money put aside for emergencies. It could be on a credit card, it could be money in a bank, which you can use to cover any unexpected costs that aren't covered by insurance. This will help when you have some bad tenants and the property's damaged. If you don't have insurance - you can get it fixed and rented really quickly.  You will then get cash flow coming in to you again. 

So follow the 5 Golden Rules, and it will minimise the risks and maximise your return of your property investment in the UK.