Rental investment remains a reasonably stable sector with simple rules. Buying a business in a nutshell for rent is profitable if the rental rate of return is encouraging. We must, therefore, learn about the location of the property and rental prices, favor large cities and real estate close to amenities, but especially favor studios and small apartments which are very popular among young people.
While real estate is the sector that attracts the most people in the world who invest in the UK’s real estate market, rental investment is becoming more and more a field in itself. Buying a business in a nutshell for rent remains more profitable today than placing your money in a bank, provided of course that the rental yield of the property exceeds the rate proposed by the bank for the accounts booklet.
Well before deciding to proceed with the purchase of an apartment, you must think about finding out about its location and the rental price of real estate in the same building, or even the same neighborhood. You can then calculate the rental yield of this property by dividing the annual rent by the total cost of acquisition of your property.
For example, for an apartment purchased at 200,000 pounds and to be rented at 1,000 pounds per year, the rental yield has a very encouraging rate. It must, of course, take into account the cost of a possible bank loan and the various maintenance costs of the property. But we must also think about its reasonable valuation with a maturity of 10 or 15 years.
Promote large cities and small areas
Rental investment remains a reasonably stable sector with simple rules. For making this investment successful, it is first necessary to favor the big cities where the demand exceeds the supply. These cities, like others, experience an active market with the increase in the number of young people using rental rather than the purchase of the real estate, but also the appearance of industrial hubs near significant cities that encourages young people to rent near their place of work.
Think also about student rentals, which are usually near schools and colleges. This rental is generally associated with seasonal rentals. Although some students prefer to leave their homes at the end of the academic year, more and more choose to rent for long periods and stay there to do internships or student jobs.
The location of the property has paramount importance. Its proximity to amenities will undoubtedly make its purchase price higher but at the same time more interesting for rental.
Other advice, tenants are increasingly tending to small areas. Finish the apartments of over 120 square meters with several bedrooms and separate bathrooms. Market trends show that people are moving to studios or small apartments, ideal for young executives looking for autonomy, or young couples seeking tranquillity. They also have the advantage of being easier to furnish.
When managers who invest in the stock market talk about direct investment in real estate, they usually do not have great things to say. In comparison with the actions, they emphasize its low liquidity, the continuous investment in maintenance that it requires or the less diversification. Therefore, it is even more surprising when they are heard saying that the current trends are interesting.
The profitability of the Buy business in a nutshell
To evaluate the opportunity of a real estate purchase for rental, it’s important to study some variables. The first variable to consider is the price. Investments in the short or medium-term are very risky these conditions.
To maximize the chances of added value for resale, buyers should consider keeping their property for at least 10 to 15 years i.e. the usual average price cycle in real estate. The second variable to consider is the measurement of rental investment performance.
To do this, the buyer will have to calculate the rental profitability of its property, i.e. the ratio between the cost of purchase of the housing and the annual rent. It’s important to consider management fees, expenses, and tax benefits.
The profitability can go from 2 to 7%. Residential addresses generally have a lower return (because they are more expensive to buy a business in a nutshell and they consume more management costs);
On the other hand, they will have a higher potential return on investment (possibility of achieving a higher capital gain). Do not hesitate to get professional accounting services or to search accounting firms near me to help you calculate the profitability of your rental investment.
We’re a leading accountancy firm working in the buy-to-let consultancy business in Watford and to help you to find an accountant. Contact us now to learn everything about your buy-to-let prospects.