My HMO Journey: No rest for the wicked as we approach...
There are more options open to the private property investor than many people realise. So before you start thinking geographically about an investment, it might first be well worth exploring the different types of property where your money could work even harder for you.
Government measures to address the national housing shortage have all but squeezed the life out of buy-to-let residential property investment. Radical changes to tax and planning requirements mean that being a landlord is harder work than ever for a desperately poor return which, in some cases involving a leveraged mortgage, can even turn into a loss.
But many people understandably feel more comfortable with the tangibility of a bricks and mortar investment – they just aren’t certain where to look for alternative opportunities.
There is a whole raft of commercial investment options available to the private investor, some better known than others.
All of them offer major benefits from their classification as commercial insofar as they are exempt from Stamp Duty Land Tax on purchases up to £150,000, and from Capital Gains Tax on resale.
Corner shops, convenience stores and small office units have been popular in the past; however, technology and its influence on the way we shop and work has had a profound effect on the number of ‘To Let’ signs and boarded-up frontages on our High Streets.
Other options include self-storage units and car parking spaces; these should be thoroughly researched prior to any investment funds being handed over. There are genuine opportunities in these sectors; it’s just that they can be very well concealed.
Catering and entertainment properties such as pubs, clubs, cafes, hotels and restaurants are another way in, although they all require specialist expertise which, if you don’t have it yourself, may prove prohibitively costly to buy in.
Purpose built student accommodation and serviced apartments are two of the best-kept secrets in the UK’s private property portfolio.
People just seem to take it for granted that new student apartment and studio developments belong to the universities – but most of them don’t. Nor do serviced apartments necessarily belong to hotel chains which are branching out, as some believe.
In fact they are being constructed by private sector developers who have identified massive unsatisfied demand both now and long into the future; many of them welcome the involvement of private individuals by offering them the opportunity to make single unit investments in both these proven income providers.
Every year since 2011 has seen student accommodation at the top of the UK’s high yield chart, according to Savills who also recognise serviced apartments as the fastest growing assets in hospitality.
Both types of property are available as fully-managed investments, meaning that you have nothing further to do after purchase except enjoy an effortless income.
There are 2.3 million students in the UK at the moment; only around 600,000 of them can currently rent a room in a purpose built development.
You might think this shortfall of 74% means that any purpose built unit will make a terrific investment – but beware.
This is a national figure, and there are certain popular locations which are actually nearing an oversupply, which compromises their long-term investment appeal and resale potential.
For this reason you’ll be better off bypassing predictable destinations such as Liverpool, London and Manchester, exploring instead less fashionable but equally popular and ambitious university towns such as Bradford, Huddersfield and Stoke-on-Trent. They are light years away from student property saturation and have higher than average undersupply levels.
Initially an urban alternative to hotel accommodation for business travellers, serviced apartments are now a popular leisure accommodation choice. Spending by overseas visitors in the UK has been on the increase each year for the last decade, and the exchange rate is attracting record visitor numbers.
And with more of us British opting to take a holiday on our own island, a prime coastal location in our no. 1 tourist destination region would be an ideal place to invest.
There are a lot of companies out there offering student accommodation and serviced apartment investments – and what they offer varies wildly.
James Harrington, Business Development Manager at sector specialists Emerging Property offers new investors a few pointers: “Obviously investment is all about yield, but it’s also about resale. You should be able to find a property offering a NET yield of 8-12% per year; do make sure it’s contracted for at least 10 years and fully transferable. This will allow you make capital growth of up to 40% while having buyers queuing up for the excellent yield you’ll be offering.”
Harrington also emphasised the importance of a true NET income – “Once you’ve bought the property, you shouldn’t have to pay out another penny during the fixed income period”, he commented.
For further reassurance that yours is an informed investment, you should be able to examine all the research and due diligence that led the developer to choose a particular location in the form of a downloadable Investor Report.
It never hurts to ask an expert.
All our consultants know all our properties inside out and will be more than happy to share their knowledge with you. Theirs is a “no hard sell” approach, so feel free to get in touch any time and just have a chat.