Our First Time Investor Guide
Updated on: Oct. 30, 2019, 11:05 a.m.
Maximising the return on your property portfolio
A first-time investor's guide to London
How's LiFE in London?
London's property market has endured a lot during the last few years as increases in Stamp Duty and Brexit uncertainty swept through the capital. Initially, these factors caused many investors to adopt a wait-and-see method when expanding or starting a property portfolio.
At the start of 2018, London's growth slowed to just 1% and some investors were tempted by more northern opportunities in cities such as Manchester, Liverpool and Birmingham. However, despite any uncertainty, London is still a hotspot for investment and is continuing to help those who trust in the property market to grow their wealth.
Oliver Tyrrell, our Area Sales Manager, spoke to us to offer a realistic view of London's property market:
"While our capital has seen property prices slowing down, they've hardly fallen off a cliff and are in fact still growing. The market is ultimately decided by supply-and-demand and as property prices are currently lower than usual, the demand for London property is naturally increasing. This will swiftly outweigh the supply and once again increase the housing prices."
Observant investors will recognise the opportunities available to them. A combination of lower house prices and a drop in the British Pound have seen many overseas investors secure properties at a 15-20% discount compared to pre-referendum prices.
There are also many who will be looking to either start or expand their investment portfolio within London's property market. Whether they're domestic or foreign investors, knowing where to invest and the help you can get is key to success.
At LiFE, we spoke to our resident experts about the investment opportunities available across London. They also offered advice on how to maximise your profits through a property management agency.
Where to invest around London
Where you invest depends on your budget, and while a first-time investor may have dreams of Kensington, Chelsea or Knightsbridge, it's probably unrealistic. Creating a profitable portfolio in London requires investors to look for areas that are seeing plenty of development.
A great example of this are the areas along the new Crossrail route. Even though the line is not set to open until 2019, prices of properties located within a mile of the stations had already risen 66% by May 2017.
Oliver Tyrrell spoke about the rich investment opportunities along the Crossrail line:
"Many of the increases in value have already happened, even though it's not set to be fully open until next year. However, from an investment perspective, the rental return is still going to be very healthy. The Crossrail route is saving 20-30 minutes on some routes and so any properties near the relevant stations will be in high demand."
Over towards the west side of London, Hounslow's strong array of transport links make it an attractive area for investors. It offers direct access to the Piccadilly line, which connects the area directly to Hammersmith, South Kensington and, of course, to Piccadilly Circus itself. The area is also close to Heathrow Airport which offers not just access to flights across the world, but also one of the new Crossrail terminals.
The area is becoming popular with buy-to-let investors and with new developments such as Trinity Square, Central House and Craneshaw House on the horizon, Hounslow is a solid spot to start your portfolio.
Another area that's seeing plenty of development is North Acton, with Acton Main Line station also set to join the new Crossrail route. As a result, the current and future properties that call the area home will start to see a lot of interest from investors.
The Acton area already has a strong network of rail lines that currently leave you no more than 30 minutes away from some of London's top destinations, like the West End and Bond Street.
Alongside this, Acton has a heavy student presence. This means that it is a hotspot for young professionals who will be looking to rent properties as they try to make a foothold in the capital.
Recently Nine Elms has seen a form of resurgence. If you go back 6-12 months, stock throughout the area was hard to budge, but with the new regeneration scheme pumping £15bn into the area, we're agreeing more business in Nine Elms than ever before.
With such high demand in the area, Nine Elms is a great place for first-time investors to begin their portfolio. Some developers in the area have knocked 5-7% off their already competitively structured price list and this has led to plenty of new opportunities in an area dubbed 'Europe's biggest regeneration zone'.
Typically successful areas such as Canary Wharf are, as always, in high demand. However, those looking to start a portfolio may need something further afield. If this is the case then there are plenty of exciting opportunities available in areas such as Canning Town or Aldgate.
How to find the best agency rates
Whether you're a domestic or foreign investor, you may decide that using a property management specialist such as LiFE would be the best route for tenant sourcing and property maintenance. As a first-time investor, it can be tough to know what to expect when you approach an agency, especially in London where prices can seem completely different when compared to the rest of the UK.
Daniel de Abreu, our Area Lettings Manager, shed some insight into the types of costs investors can face:
"Typically, with a London-based property management agent, you're going to see costs of anywhere from 12% to 17.5% of your rental income. Based on this cost, the level of service you'll receive from them will vary from basic tenant acquisition to a full maintenance offering. Our advice to new or seasoned landlords is to look beyond the headline figure. See what they're offering and make sure you're getting the best deal."
The agency route is especially attractive to foreign investors as it gives them peace of mind that even though they're not in the country, everything is taken care of for them. From gas certification, which can cost upwards of £100, to any emergency maintenance issues which can lead to huge costs, a management specialist can handle it all.
Allowing a lettings agent to take a percentage of your total rental income can seem like a big expense, but it can actually help you maximise your investment profits. While deciding to manage your investments yourself is a viable option, you won't be able to access the benefits that a managing agent would offer. From a pool of contractors to a database of trusted tenants, property managers help you save money on maintenance whilst also ensuring you receive the best rental income for your property.
Daniel commented on how working with a property management company like LiFE can help maximise your return on investment:
"We currently manage over 4,000 properties across London, so we need a large contractor pool to help us out with works. Our partnerships with contractors around London give us favourable rates and our knowledge of the lettings industry means we can help you agree better rates. While you're giving us a cut of your rental income, you're being given peace of mind and the knowledge that once we're looking after everything, you don't have to worry about any hidden costs."
What to expect from your property management specialist
There's a reason investors from all over the world flock to London's property market when they're deciding what investments to make. Historically, the capital appreciation has been positive and with demand consistently outweighing the supply, London has become a bit of a safe haven for investors.
Those who invest in the London property market can typically expect to see a reasonable rental income alongside the long-term appreciation of their assets.
However, there are plenty of issues that face landlords operating throughout London and while experienced investors may know what to expect, a first-time investor may be unprepared.
Daniel de Abreu spoke about the challenges and common risks faced by landlords:
"One of the biggest issues that first-time investors need to know about is fraudulent tenant applications. If you don't have much experience in this sector, then it can be easy to overlook background checks and fall victim to fake identiy. This could lead to a tenant subletting your property or late rent arrears. These issues aren't ringfenced in London though; they're an issue across the UK and a moment of naivety from any investor can see them fall prey to these scams."
At LiFE, we've had a couple of examples of potential tenants trying to trick us with fake IDs. However, we use an independent supplier, so we're able to flush these fraudulent applications out.
There are plenty of horror stories in the media of fraud and identity theft, with some severe cases leading to the tenant selling the house they're renting. This has become such a problem that the Land Registry have implemented a system to alert property owners if they suspect this is happening.
Working with a management agency, like ourselves, can ensure that your tenants have been vetted by qualified experts. We can also help first-time investors avoid problematic candidates, fraud and rent arrears.
How to find the service you need
Many first-time investors, especially those overseas, look to work with a management agent to help relieve the pressures of tenant acquisition, maintenance and rent collection. When it comes to picking a company to work with, the first thing to decide is what level of service you'll be needing.
Typically, there are two different levels:
- Tenant introduction - this is the more basic service where an agency will find you a tenant, reference them and ensure that they are suited to your property.
- Full management - this is a more comprehensive service that deals with everything from tenant introduction, to rent collection, compliance issues and any maintenance.
Once you know what you need from a lettings agent, you need to find a reputable company that is recognised by an industry body. From a lettings aspect, that would be ARLA, which is part of the National Federation of Property Professionals.
Daniel de Abreu discussed how important it is for LiFE to maintain accreditation throughout the company:
"In terms of NFoPP qualified staff members, we're at the forefront of the industry. We want all of our people to be recognised by an industry body and currently around 87% of our staff members are."
While accreditation is one of the more important factors, first-time investors need to know that their best interests are at the heart of the agency they're going to work with. At LiFE, we're constantly trying to improve our service by investing in technology that will help landlords and tenants.
Recently, we've utilised a tenant onboarding platform that allows documents to be e-signed and for deposits to be paid via mobile phones. This tech has been effective when it comes to new millennial tenants and overseas landlords who wouldn't be able to sign documents in person.
Alongside this, we have a landlord portal which allows investors to log in and see recorded histories of properties, statements, and repairs, and lets them know who their points of contact are, from accounts to property management. This portal gives us a unique advantage over many London-based agents who don't yet have anything similar.
Daniel commented on the importance of investing in technology:
"To get above the competition and truly stand out, we need to constantly be delivering more value for our clients' money. Whether it's investing in new tech to appeal to millennial audiences, or partnering with tax consultancies to ensure all our landlords receive the right advice, we want any investor to see how we're evolving and how it will benefit them."
When you're looking for an agent, you want to make sure they're not just going to provide you with value for your money, but they're willing to make investments to help streamline the relationship between landlords and tenants.
If you're thinking of becoming a property investor and would like some more advice, please don't hesitate to contact us using the form below, or by emailing email@example.com or calling our main office on +44 (0)20 8896 9990.