Most investment properties purchases are aimed at the rental sector where the investor is looking to achieve good levels of growth in the value of the property combined with high rental yields that will cover their running costs and provide income. These properties will come in a very wide and varied range of sizes from single room bedsits to large detached properties with every type of property in between.

Experienced investors will pay particular attention to where they purchase property to ensure that the location where it is situated will attract the tenant type they want. After that, thoughts will turn to factors that will provide the investor with the greatest growth and yield returns which may lead then to consider purchasing renovation projects or new build and off-plan developments that may offer particular incentives and guarantees.

Attractive Investment property locations

• Investing in London – As the UK capital and a major world financial centre London has always been a favourite with investors and historically London property values have grown faster than the rest of the UK. Rental yields have been strong and property at the top end has attracted overseas investors, keeping prices high. Recently, London has seen this trend reversing and surveyors have been down valuing property.
• Investing in university towns – Where investors are aiming at the student market, these are very favoured locations. Investors will often be looking for property containing multiple rooms, often termed homes of multiple occupancy or HMO’s. The attraction of this type of property is its potential to return high rental yields.
• Investing in Inner city locations – Investors here will be trying to attract up and coming executive types including those with families so property needs to be of high quality and well placed closed to amenities, shops and restaurants. Older professional types moving jobs or being assigned to a temporary employment will often look to rent family accommodation with gardens and parking.
• Investing in general locations – Virtually any area can lend itself to being suitable for rent as can virtually any property. However, the prudent investor will be careful to carry out a study of the area and its population to determining that the property that is to be purchased will have the potential to attract the target tenants.
• Investment Property Legislation – In recent times there has been a raft of new legislation issued providing additional rules that protect tenants, limit investor tax allowances on mortgage interest and change how stamp duty is applied.

Purchasing Investment Property

Some things to consider when purchasing different types of investment property.

• Investing via a limited company – Due to the changing tax considerations many investors are holding their portfolios under limited companies to counter some of the recent restrictions imposed by HMRC. Investors looking to do this should seek professional tax guidance to ensure this is right for them and their families.
• Purchasing a business – Due to the wide variety of businesses types available and that finance will usually be obtained via a commercial mortgage, lenders will be more concerned with your proven ability to run such a business rather than simply your ability to service the loan. Lender negotiations are usually complex and you will need to be able to demonstrate that you have a good business plan for the business.
• Buying Property at auction – This can be a low cost way of obtaining investment property but the wise investor will visit the property beforehand and ensure they have full knowledge of its condition. It is also advisable to have made any financing arrangements you require well before the auction commences as payment must be completed in a very short sett time frame. Check the Auction rules.
• Buying Investment Property off–plan – Purchasing a property off-plan (buying before the property is actually built) may offer attractive incentives to the investor, such as :

• • Structural guarantee – The property will come with a structural guarantee.
  • Rental yields – Rental yields are often guaranteed for a fixed period, often 5 years or more.
  • Discounts – many developers will offer discounts to tempt investors but it is important to be careful with these incentives as some firms may inflate the initial price so that they can spotlight grabbing discounts.

• Surveys for buying Investment Property – Your mortgage lender will always require a survey on any property on which it is asked to lend. These surveys are mainly to establish the true market value of the property and will give only limited information on the actual condition of the property. With investment property where it is intended to do some building work and upgrading or where the property is old, it can be sensible to arrange for a full structural survey which will give you a detailed report on the true condition of the property, prior to committing to purchase.
• Legal matters – Whatever type of investment property you intend to purchase, you will need a solicitor to conclude contracts. Your solicitor will check your financial arrangements, arrange payment with the seller, pay stamp duty and register you as the property owner.
• Investment Property Insurance – The lender will require that you take out buildings insurance covering the rebuilding cost of the property. It should be noted that if you are buying a property situated in an area that is subject to flooding you may not to get insurance for it.