When you purchase property, you want to know that your investment is going to pay off in the long run, so what are the best ways to set yourself up for future gains?
The housing market always has been and always will be a constantly changing sector, influenced by external political and economical factors, interest rates and even the weather. What property investors want is some level of assurance that their next investment – or even first investment – is future-proof enough to withstand various market fluctuations, which can often not be foreseen.
Below are five things investors and buy-to-let landlords can consider to try to ensure that they reap the maximum rewards from their investment further down the line.
1. Ignore Brexit?
Still top of the agenda across most sectors of the UK, the fact that our position within the EU is still undecided has caused a slowdown in transactions. However, many experts agree that the outcome of Brexit is unlikely to affect house prices in the long term, although some areas will be more affected than others. While investors don’t want to ignore political uncertainty’s impact on the market, it is important to also look beyond it.
Kate Faulkner, housing expert and founder of propertychecklists.co.uk, says: “I don’t think buyers should be put off by fears of a house price crash as long as they mitigate the risks. If you bought a property now, even if it did drop in value in the short term, the market would probably have corrected itself by the time you wanted to move (assuming you stayed there for at least five years).”
Read more about this in our article on the 18-year property cycle.
“With property deals available and rents on the rise, now isn’t a bad time to be a landlord as long as you really understand your objectives and whether the deal stacks up both now and in the long run.”
2. Go green
Probably the next most talked about topic right now after Brexit is the international climate change emergency. The world is becoming increasingly eco-conscious, and the housing market is already following suit – but it’s safe to say this is going to become increasingly important as time goes on. For buy-to-let landlords, there’s already a minimum EPC standard of E, and this will undoubtedly be raised in the future.
Investing in a new property, which tend to always have to highest EPC ratings, is therefore a good way to future-proof your investment. Going “green” has a range of benefits to landlords and property investors, from favourable mortgage rates to adding extra selling points when trying to attract tenants, such as low utility bills and low maintenance.
3. Beat the tax changes
Tax is another element that really cannot be fully predicted, as various governments will always bring in different measures. One method for beating tax changes that is currently popular among buy-to-let landlords is operating their investment properties through a limited company.
You can learn more about this in this article about limited company structures.
There have been rumours that the current government could make major changes to how stamp duty affects property investors, but whether this will ever be implemented remains to be seen. However, keeping up to date with other taxes affecting buy-to-let – income tax, capital gains tax, inheritance tax, for example – can make a huge difference to the profitability of your investment. It can help to speak to an independent adviser.
4. Adapt to modern life
The way people live is changing, as is the way people own homes, and you can future-proof your property investments by being aware of this. Homeownership is in decline as more people rent for longer, which is the result of both necessity and choice.
As tenants age, their standards and expectations rise, and this gap is currently being filled by the build-to-rent sector – learn more about this here.
Further to this, people’s work-life balances are drastically changing as working from home is becoming the norm, meaning internet connectivity is key to any property investment, as well as providing workspaces. Where people do have an office to go to, they favour short commutes more than any other element when factoring in where to live, so investing near great transport links can ensure the future popularity of your buy-to-let investment.
5. Choose investable locations
Keeping an eye on house price changes and trends can be a good way of keeping an eye on a housing market in a certain area, although it is probably better to look at long-term trends rather than weekly or monthly changes, which can be misleading. Halifax, Nationwide, the ONS and Rightmove all publish house price indices, and all will give a slightly different story, but you can still glean some knowledge from them.
Most experts agree that, in general, the north has outperformed the south in recent years in terms of capital growth, and this is expected to continue. It is also important to keep an eye on where there is planned future investment, as this can attract more residents and provide a knock-on effect for added regeneration. Also, it’s not just the major cities but the commuter belts around them that can prove to be good long-term investments, particularly in areas where transport is set to improve – such as Northern Powerhouse Rail.