Property investment has become one of the most enticing avenues for investors all around the world to venture into. When searching for the best property investment, investors often have different strategies to get to the top but share the same vision for what waits over the horizon. The mouth-watering prospect of large positive cash flow through rental income is indisputably the biggest driver for investors wishing to fast-track their way to retirement.
What remains up for debate is the effectiveness of investing close to home and whether branching further afield is the best strategy to achieve all of these goals. Location is the most instrumental determinant to how successful a property investment will prove to be so investors should never underestimate the power of investing in unfamiliar territories. To help with the process of choosing to invest either close to home or from distance, we have devised this thorough assessment covering the ins and outs of such an important decision.
Can overseas investors buy UK property?
Quite simply – yes! For a long time now, the UK has made its name as the prime place for thousands of investors from all corners of the world to build lucrative property portfolios. Projected capital growth, unrivalled rental yields, and favourable exchange rates are just a handful of reasons why expats from all regions are competing for the best property investment opportunities. Due to the highly acclaimed full management investment service we provide, Elavace are proud to have long-lasting partnerships with clients from all degrees of wealth and fortune. Using 65+years’ experience, we align each and every one of our overseas investors with the most expertly crafted investment strategy for them.
The overwhelming surge of options suitable for all budgets is why the UK is leading by example to the rest of the world and why Elavace are proud to be a part of it every step of the way. And whilst much of this astonishing success has been by virtue of London’s price acceleration over the last decade – times are changing and fast. Home to the UK’s major employers, universities, colleges and multi-billion redevelopment policies: Northern powerhouse giants like Liverpool and Manchester are where ALL the action is now at!
What percentage of UK property is owned by overseas investors?
With its world-class cities, flourishing financial sector, and full-bodied legal system, the UK property market has always been a hotbed for overseas investors. According to Buy Association, property investors from Asia, the US, Europe and more have long considered the UK property market as the best investment location. However, it’s fair to say that over the last decade the number of homes let by non-UK based owners has rocketed.
Much of this recognition comes from the notoriously strong capital appreciation, ever growing rental markets and exemplary support of continued private and public investment across the country. The prime example of this is in the rising city of Liverpool where over £14bn has been invested into the regeneration of the North-western spearhead. This might be why data revealed by Hamptons International shows that the number of overseas investors investing in British bricks and mortar spiked last year – up to 11% of the total market share from 7%!
The benefits of long-distance property investment
- Access to more lucrative markets
Make no mistake about it, there are a long list of reasons for why investors need to consider the idea of investing outside of their comfort zone. Sitting firmly at the top of this list is the unbounded freedom to invest in more affordable areas with the promise of far greater rental yields and potential for strong capital growth. And along with this, pick and choose between areas that meet the specific criteria you are looking for. Keep in mind that the odds of you living in the absolute best location available for your specific investment strategy is very low. Thus in order to maximise the likelihood of success, location is of the utmost importance when deciding on the best property out there.
- Develop efficient systems
Another consideration to make is whether you wish to conduct your property investment journey like a job (landlord) or a business (investor). If you are leaning towards the latter, then working from a distance is the undoubtedly the best path for you to take. Many experienced investors would support the notation that the ability to keep your investment at arm’s length forces you to work in a more systematic way. This is because adopting a business model will lead you to base decisions of fundamentals such as: rental yields, opportunity for growth, and/or levels of risk.
Investors who choose to look at it like a job will often seek too much control which isn’t always wise because at some point or another, managing any number of properties can become too much to handle. Working remotely leads you to develop approaches and efficient systems which are a good idea to adopt even if you were living next-door to the investment property. Sticking with the business mindset, using effective systems also forces you to delegate which involves putting trust in others – one of the best ways to build a strong network of partners!
- Fast-track to retirement
In recent years, property investment has become increasing popular path amongst full-time working professionals in the pursuit of fast-tracking their way towards retirement. Since interest rates began to plummet down to unprecedented lows, thousands of savers started to consider alternative investment strategies for their money. Property investment quickly became a hotbed for investors wishing to approach retirement with an income which can keep up with inflation and more than enough supply of it to last a lifetime.
Location is paramount to achieving strong rental yields and so looking outside the box is wise, especially if you’re in it for the long run! A perfect of example of this is the thriving city of Liverpool; greatly renowned for its rapidly rising rental yields which are enticing cash investors from all across the world. According to Buy Association, this year’s findings from UK Land Registry, Zoopla, On The Market and Property Data Figures, revealed Liverpool as the UK’s top performers for property. This comes as numerous postcodes in the Northern Powerhouse giant appeared in the top 20 list, achieving the proud title of highest-yielding location overall.
The drawbacks of long-distance property investment
Owning rental property far away from home can be a difficult undertaking at first. These are the most typical challenges long-distance investors encounter:
- Lack of knowledge about the area
The most obvious reason why investors might be too afraid to invest in a new location is the lack of familiarity with the area. Investing in the location you live and breathe in provides investors a sense of security and assurance like no other. Whilst you might have a clear understanding of all the local rental regulations, tenant types, and rental trends; this doesn’t guarantee the maximum possible return from your investment.
Be that as it may, we do recognise that investing in a distant market requires extensive due diligence and is not the same as being born and raised in one particular property market. If the opportunity for greater financial returns is more comforting than the blanket of your own home, keep on reading to find out the best way to leave no stone unturned when researching new property markets.
- Reliance on others
Becoming a long-distance property investor means that much of the day-to-day responsibilities is out of your control. As thousands of investors living in the South holding investments in the North-west will agree, the ability to swing by and check out a property on the way to the local shops is an overlooked privilege. This is where thousands of property investors resort to hiring a professional property manager.
In exchange for a percentage of monthly rent, landlords can have the peace of mind that their properties are in safe hands at all times. In short, a professional property manager will take on the burden of filling the space, handling tenants, and maintaining the building. This fee doesn’t just cover the day-to-day challenges of managing a property; with a high-quality property manager like Elavace Estates, landlords can gain 65+ years’ knowledge and experience in maximising the income potential of one or multiple units. Paying for highly acclaimed agents will always manage to balance itself out against the time saved when running around trying to find/reach the necessary people.
- Time consuming
When an investor is working in a busy job and time isn’t at their disposal, its safe to say that viewing a selection of properties in afar-out location can be very time consuming. Whether it be by car, train or plane, begrudgingly travelling to properties hours away can lead someone to make a rash decision which may lead to problems in the future. There are so many responsibilities that you can outsource to more trained and specialist teams such as Elavace, who can submit a complete inventory report and checklist on each property. This level of service is not that expensive and can take your research up to another level which will boost your confidence. It is more than possible to do it all yourself but you must always be organised. Remember: it is possible for some purchases to not go very well – however, this isn’t necessarily an issue of distance but rather, a lack of due diligence!
How to be a successful long-distance property investor
1. Learn about the local market
You should always perform a diligent market analysis before you decide whether you want to invest in a particular location or not. And as promised, here a number of methods for you to use when conducting extensive due diligence into a whole new property market. First and foremost, there are websites available such as Rightmove and Zoopla which can give you an idea as to how much the market value is for renting and buying property in that area. This can give you a feel of the return you can expect to make on homes within your price range.
The next step is to find a good property consultant who can listen to all of your needs and concerns and utilise their own experience and knowledge to navigate you accordingly. The purchase process of a property can in itself be one of the most challenging stages for overseas investors. The best way to compensate for not physically viewing a property is to find a consultant who can do it for you. These will be able to complete an inventory checklist and survey on the property which can boost your confidence and assurance in the decision at hand. We are well aware that this involves a level of trust in whomever the consultant is, thus if you are unsure how best to decide on this – read our guide here detailing 6 good traits all property consultants must have. Spoiler alert: one of the most important traits for a consultant to possess is a thorough understanding of not only local knowledge but also national knowledge. It is easy to fall into the hands of a greedy consultant whose only goal is to make a quick buck – so give our guide a read and do your research to ensure you’re dealing with a problem solver, not a problem seller!
It is important to maintain a pragmatic approach to your research and avoid being misled down the wrong track. Communicating with fellow investors in a particular location or a local estate agent who doesn’t sell investment property will mean that the information you receive is unbiased and accurate. Find out why they invest their time and money into one location and not for others – you would be surprised what you might learn! We must stress that where possible, assess the areas in your own time using various online portals like Hometrack or better yet, PropertyData. This online resource tool will provide you with a whirlwind of information about any area, such as: rental yields, capital growth, demographics, availability of certain criteria, and even local crime rates.
2. Learn about the local investing laws
In the UK, laws can differ not only from one county to another but also from one city to another. There are so many legislations and regulations to consider when venturing into uncharted territories that we can assure you this becomes very confusing for any investor new to the market. These can cover a wide range of property investment, such as: financing, property taxes and other incurring fees, landlord-tenant relations, tenant deposit security, eviction processes - to name a few. Even after you have invested in a particular property/area and have found the necessary tenant to fill the vacancy, it is so important to keep up to date with all legislative and regulatory changes. Deploying the services of an investment management agency will help you stay on the right side of the law and continue to make smart investment decisions.
3. Hire a reliable management agent
Next on the itinerary is to find a reliable property management agent. You can easily do this through your own online research on Google; there you can find reviews, testimonials, prices and the range of services available. And once again, we can’t advise networking enough. Building bridges with other investors in the area can provide you with a realm of trusted recommendations to choose from. Using their key insight early in the investment process can save so much time, energy and most importantly, money spent with the wrong people.
Choosing whether to get an all-in-one management company who can offer property maintenance and management is an absolute no brainer when investing from afar. Starting with maintenance, when there are just a couple of small jobs here and there, you might decide to do it yourself to the best of your own abilities, for example: painting or re-carpeting. However, when the work is on a much larger scale, it's time to bring in the professionals who can make sure everything runs smoothly.
Not only this, with the help of a property manager, you can gain access to the most cost-effective and reliable tradesmen to handle any of these issues. This is because property managers have strong relationships with local maintenance workers, tradespeople, contractors, suppliers and vendors, so they can get the best work done at the best price possible. Living further away from the property makes it difficult to conduct regular checks and the worst thing you can do is leave tenants for days/weeks with a problem. Every time a tenant reaches out, it is critical the issues are dealt with in a timely manner. Failure to do this might lead to tenants becoming more relaxed in their relationship with you and as result, not notify you of minor problems that can quickly turn into big ones.
Onto property management, putting an agent in place is undeniably the obvious thing to do. Whilst self-management from a distance is totally possible, it can prove to be a real challenge especially starting out in a new area with the absence of a good network of trades. This is because there will be issues that arise that are impossible to deal with from many miles away, like serious maintenance problems or late rent payments. In these cases, the landlords presence will be required which then means that you must travel all the way to the property which can be both time-consuming and more importantly, expensive. Enlisting a professional property manager will mean that you as a landlord will never be confronted with the uncomfortable and costly situation of collecting late rental payments. Not to mention the hassle of an unwanted road trip!
4. Consider all the costs and decide if its worth it
As mentioned earlier, investing where you currently live doesn’t necessarily guarantee the maximum possible return from your investment. This is why it is sensible to look for properties in other locations offering considerably more affordable options and greater levels of return on investment in relation to rental income, cash flow, and capital growth. The best example of this is in Liverpool where the booming buy-to-let market boasts 6 local postcodes making the 2020 top 25 yield returns ranging from an impressive 7.13%-8.67%. This was easily above the England average of 5.8% for Q2 of 2020 and that of London where yields were the lowest recorded in the country at 3.1%, according to Zoopla last month. This was followed by Kensington and Chelsea, and the City of Westminster.
Another consideration which you will have to factor in is the additional costs which you are likely to accrue when investing from distance. If you do intend to take on a more hands-on approach, then you will need to travel more frequently to visit properties and keep regular tabs on your property investment property upon purchase. There is also the cost of hiring a professional property management agency who are there to assist you with every stage of the journey and ensure you incur further costs due to negligence. This fee doesn’t just cover the day-to-day challenges of managing a property; with a high-quality property manager like Elavace Estates, you can gain way over half a centuries worth of knowledge and experience in maximising your investment potential.
With all of this in mind, make sure to include all of these extra costs when drawing up a budget and making the decision to venture into new locations. Failure to do this will run the risk of ending up with a negative cash flow property and your ‘not-so’ dream home rubbishing away all of your savings!