Thinking of buying a property in the UK? Before doing so there are some essential things you should think about before diving in headfirst; such as is this for personal use or are you looking to make a profit? Depending on which of the two is your intention, Globaleye has put together a list of 10 things that will help you in preparing for buying a property and to make sure you have your financials in order so you can make the most of this investment.
1. Before you buy the property, you must distinguish if this is a home for yourself, or is this an investment? That being said, is this something that you are looking to rent out, and/or eventually sell as the property value rises? If you’re looking into renting out the space, the first thing you should do is establish the property under an LLC so you can get better tax write-offs and you will not be personally liable for anything that may happen on the property.
2. If your intention is to rent out the property, know who your target market is i.e. type of tenant. If it’s a house, then think about focusing on families, rather than college students because you’ll probably have to end up spending quite a bit on fixing damages to the house due to rambunctious parties. If the property is a condo, think about long-term versus short-term residents and what kind of professional you want to rent – is this person a struggling artist who may have trouble paying on time, or is this someone with a career who’s dependable.
3. Before jumping into anything, have your funds in order first and have a plan as to how you’ll pay off the property. Perhaps you have enough capital on-hand to pay upfront, or maybe you’ll have to apply for a mortgage. Also factor in how much rent would cover the mortgage and other property taxes. But at the moment, now is the time to make a move with UK interest rates at an all-time low.
4. Keep in mind if you might have any taxable income from the rent, and if any other taxes might be applicable.
5. Have a budget and stick to it. Don’t end up paying more for a property than you’ve planned and budgeted, and certainly don’t take a lower rental rate because the tenant is a nice person; management fees, repairs, maintenance etc will add up quickly
6. Look at the property multiple times, at different points in the day – perhaps there are trains that run by late at night or a bar that gets loud after a particular time or day of the week. You should treat this as a long-term relationship that you won’t just jump right into until you’ve gotten to know the place and would be prepared to live there as if it were your own home.
7. Take property management serious; will you have a friend simply check-in on the place, or hire a management company? If you’re going to go with a real estate company, what are their fees and how reliable are they? Remember that bad reputations from an agency can also reflect badly on the property and hurt your investment.
8. Have a lawyer make sure everything is in order. It’s important that you have insurance, proper licenses and certificates for being a landlord. Have all of your contracts for tenants drawn up by a lawyer and notarized when it comes time to have it signed so you’re covered if an eviction needs to take place.
9. Plan for a ‘rainy day.’ What if the property is vacant for a period, are you still going to be able to pay the mortgage? And if so, where is that money going to come from? Hopefully not from your savings.
10. Think long-term, how long do you plan on hold on to the property and if it’s not forever, what contingency plan do you have in place to sell it and make sure your investment has the right amount of return you were looking for.