A lot of people are put off investing because they don’t believe they have the necessary expertise. Of course there are plenty out there who genuinely enjoy juggling their stocks and shares and trying to anticipate which way the market is going to jump, but it’s not a requirement by any means.
There are specialists in every field of investment who will, for a fee, manage your portfolio for you. But when it comes to property, all you need apart from capital is a bit of common sense and an open mind.
Rental income – nothing else matters
In the current climate, you should only consider residential property if you want to live in it. Capital growth is anything but assured in this exceptionally volatile market, and residential buy-to-let investments are dying on their feet thanks to a combination of taxation, legislation and poor yields.
Rental income is the lifeblood of a property investment, and to give yourself the best chance of achieving satisfactory levels of rent, you need to look at commercial property.
This is because operational commercial property is valued on two criteria – its current NET rental delivery and its covenant strength; this refers to the calibre and permanence of the current tenant and the potential of finding an equally suitable replacement further down the line.
Off-plan commercial property obviously won’t have any tenants yet, nor any rental income. To make an informed judgement about a proposed development’s chances of success, you need to know about the immediate and wider area, its economy, inward investment, the imbalance between rental property supply/demand and long-term prospects for expansion or rejuvenation.
This may sound like a lot of work requiring expertise, but don’t worry – any reputable developer will have done extensive research and due diligence before buying the land in the first place.
All this information should be made available to you in a single, easy to digest document. If it isn’t, don’t give another thought to investing, walk away and look elsewhere.
What kind of commercial property performs best?
Just look around you and see how many ‘For Sale’ or ‘To Let’ signs there are outside office blocks, shops on quieter streets, pubs, industrial units and independent garages; it’s not exactly a boom.
One of the two sectors which are bucking the trend, however, is serviced apartments, where UK occupancy rates have overtaken hotels. The other is purpose built student accommodation, which has been the UK’s highest-yielding property asset for the last 7 years.
But before you dive in, you need to find out more about the property’s location and its levels of undersupply; some serviced apartments and student properties do much better than others, and they’re often where you wouldn’t necessarily expect them to be.
Again, your developer or their agent should offer you all this information without having to be asked.
A good UK investment should provide you with an assured annual NET income of between 8-10% for a fixed term, ideally 10 years; beware of the developers who inflate their purchase price and offer yields of around 7% for 5 years. This will restrict your resale and capital growth prospects, and may be a sign that corners have been cut during construction.
But I don’t know anything about running a property
You don’t need to – there are local agents all over the country who’ll do it for you, at a price.
But the best serviced apartment and student property investments come with full 24/7 onsite management at no extra cost.
In fact, there should be no further costs at all during your contracted term, and nothing whatsoever for you to do. All marketing, letting, maintenance, repairs, replacements and rent collection will be done for you.
Yours should be a completely effortless income.
How to get started
Emerging Property are yield-driven commercial property investment specialists, with an established portfolio of both student property and serviced apartments throughout the UK.
We know we said you didn’t need any expertise; that doesn’t mean you can’t use theirs.
They have a wealth of information on their website or you can arrange a consultation with one of their property investment experts.