Propwealth’s frequently asked questions. If you can’t find an answer below, please email us.
What is Buy-to-Let property?
In the UK there is a massive demand and a large number of investors who buy property to lease out. If the property is bought well in terms of position and area, then the rent will come is as positive cash flow.
What type of return are we getting?
This depends on many factors. The first is that London is a great market for capital growth but not for yields. We have a few developments where the rent will cover the mortgage but unless these are cash purchases the yield is very small.
In other cities, like Liverpool, the property is returning a 6%+ net yield. The reason is low property cost and strong tenant demand.
Are there many people doing Buy-to-Let?
In the UK the demand for a second or third property is huge. The UK has a massive buy-to-let culture. Property meetings are held all over the UK where like-minded investors discuss opportunities and trade properties.
If an area is yielding a decent return, then the competition is steep.
What type of property do you look for?
In Liverpool and some other northern cities investors are looking for a 5% plus yield.
We prefer mid terraced Victorian homes, studios and one bedroom apartments that we can renovate and add value. They are built to last and people like living close to transport links including undergrounds and bus routes. This could be a stand alone home that we can split into two apartments and sometimes is a property we can split into a number of one or two bedroom units.
The developer looks at each property and decides what is going to be the best plan of action. Every property we look at requires a different approach.
In London, we work with good developers to bring as much value to the property as possible. Regeneration areas are key as well as properties going up around a new station. In London, the Crossrail is currently under construction so we look around the new stations across London.
What areas do you work in?
Our main focus is Greater London, Liverpool and Birmingham.
London we do the bread and butter property. These properties start at around £290 000 for a one bedroom.
In Liverpool, we look at the normal everyday property that people want to live in. These start at around £50 000 for a large studio flat upwards to larger two bedrooms at £59 000.
Do you work with many banks?
We work with whoever will gives and our investors the finance. We have a few preferred lenders that we can introduce you to. We have established a relationship with them over the years but this also changes over time.
Banks will only lend on purchases of over £100 000 (and a maximum 60% loan to value) to non-resident investors. Having a UK or EU passport but not living inn the UK still classifies you as non-resident.
How long do we hold onto the property for?
We suggest never selling. We look at our portfolio cash flow as our retirement fund.
The greatest way to build up a portfolio is slowly and carefully. If it does not show a minimum gross yield of 5%+ then we do not invest.
Why are the yields so high in Liverpool?
Low property prices mean higher yields. One issue is that the banks are not lending to first-time buyers without a large deposit of up to 40% in many cases.
This drives the rental market and makes it a perfect time for the buy-to-let investor.
How long will this last?
This is a difficult question. We are trying to make the best of it right now and will just have to look at other areas when the current area changes.
While we continue to find great yielding property we are continuing to buy. The world is changing so quickly these days but property seems to always remain the one sure investment.
Who looks after finding the tenant?
The developer has a team in place that will interview, credit check and generally get a feel for the tenant.
They will also collect the rent and deduct the bills for you as part of their service.
If you own a property currently you will know that tenants differ and a bad tenant can slip through occasionally.
Once again our advice is to get involved in your property. If the rent is late then pick up the phone and find out why. If you cannot view your property each year then try and send a friend along just to drive past. Its not an everyday involvement but some attention and care needs to be taken on the property.
Do you buy old and renovate or new builds?
We have two approaches. In London, the days of renovating and finding value for buy-to-let are difficult so we focus on capital growth and new builds in this area.
In Liverpool, we try and find old or in bad condition so that we can add value to the units.
Liverpool is normally a complete refurb with new kitchens, wiring, central heating and new bathrooms
Do you do new builds?
We do new builds in London and Birmingham. Once again we look for the up and coming areas and we only invest with larger companies.
Currently, we deal with Berkeley Homes on some really fantastic value developments in London.
How do I know that the area is good for tenants?
We do extensive research in the areas and will not suggest the property if you are going to battle to get a tenant.
We invest a lot of our time looking at areas and identifying them. This is part of the due diligence and the absolute key to the success of a buy-to-let property. We also encourage our investors to put the postal code into Google and drive around the area on line.
Are tenants scarce and how long does it take to find tenants?
It depends mainly on the development.
In London, there is a huge demand for tenants. In our north London development, we place tenants within a couple of days to a few weeks.
In Liverpool it ranges from a week to 2 months.
The agents do extensive background checks and screening.
Are you Buy-To-Let t investors?
This is the core of what we do and how Propwealth came about.
We are continually searching for property deals. We either buy them ourselves or try to package and sell them onto other like minded property investors.
Why one bedroom flats?
We prefer one bedroom and studios as the demand for tenants is strong plus the yield is normally excellent.
On saying this we have a few larger two and three bedroom units and we still get very good yields on these.
Do you always need to add value?
Adding value is a very rewarding part of investing in property.
Painting, cleaning gardens, taking down a dry wall to make it more open plan, etc. One of the most exciting value adding concepts is adding another room. This adds great value to the property.
This can be done in many cases but once again needs to be approved by local councils. We seldom find units that we can simply take over and move tenants into.