International Property Management Opportunities
There are of course opportunities to buy and rent out property
more cheaply elsewhere in the country - Edinburgh, Cambridge, Manchester
and Leeds have all seen strong growth of the rental market and of
capital values. But the attractions of London and the South East
lie in the consistency of capital growth and size of the international
corporate rental market (particularly from the US), which is prepared
to pay premium rents for top-notch accommodation.
Apart from the long-term prospects of the regional property market,
investing in real estate is an ideal opportunity for ‘gearing
up’ by borrowing a substantial proportion of the total cost.
In other words, if you have £50,000 to invest and you take
out a 75 per cent mortgage, you can buy a property worth £200,000.
With most types of stock market investment, you are limited by your
own available cash levels; borrowing is definitely not a recommended
option.
International Property Management Opportunities & Property
But although property has undoubted attractions as an investment,
before committing all your worldly goods to bricks and mortar, you
need to assess whether it’s right for you, in the light of your
whole investment portfolio and your own preferences. “The
right percentage of property in a balanced portfolio varies
from customer to customer,” says Ray Boulger at mortgage
adviser John Charcol. “Some like the buzz of the stock
markets; in comparison, property is less volatile and involves
less risk, and it takes a different kind of effort to manage.
It’s also very much a long-term thing - we reckon on ten
years commitment as a general rule, and five as an absolute
minimum, because of the upfront costs of purchase involved and
the fact that the market is a relatively illiquid one.”He
suggests that a £1 million portfolio might be divided
up with £750,000 allocated to stocks, bonds and the like,
while the remaining £250,000 can be used to raise a 75
per cent mortgage and buy investment properties of £1
million.
International Property Management Opportunities - LCP
At LCP, chief executive Naomi Heaton agrees. “We work with a
number of trust companies that are looking after clients’ entire
portfolios, and they recommend around 25 per cent of the total to
be held in property,” she comments. Of course, the minimum
amount you can put into the property market is dictated by the cost
of housing; even with the mortgage option, it’s just not realistic
to think in terms of “a spare £5,000 or £10,000”,
as you could with stock market investments. If you’re interested
in the central London option, Heaton says you really need a minimum
of £250,000 to afford a well-located, good one-bedroom flat,
kitted out for the rental market; that would mean investment capital
of around £50,000 against which to obtain a mortgage.
International Property Management Opportunities & Rental
Rental income is not the way to finance an excessive lifestyle, though.
Heaton stresses that her investors are looking to cover their costs
on an ongoing basis, but to generate impressive capital growth in
the long term. That’s why she focuses exclusively on
central London: “You’re likely to get most advantage
if you buy scarce resources; we’ve seen that trend in the
past two years, even compared with south London or Docklands. In
the centre of town there’s very little
property to buy, and strong rental demand.”
International Property Management Opportunities - Paddington
She cites the example of Paddington, until recently hardly a top-drawer
address, but with a brilliant central location and an increasingly
attractive profile. It’s still possible to pick up an unmodernised
one-bedroom flat for £215,000, she says; after purchase costs,
refurbishment and fees you’ll have spent nearer £250,000.
It will rent out for a minimum of £300 per week. LCP works on
a gross rental return of 6.5-7 per cent, or slightly higher at the
bottom of the market (because rents are higher in proportion to property
prices). Subtract the service charges, maintenance costs and, of course,
management fees and you’ll be left with around 4.5-5 per cent
net with which to cover the mortgage and build up some small reserve
against periods between tenancies, known as void periods. If
you like the idea of a toe on the real estate investment ladder,
but baulk at the prospect of being left with an unoccupied property
on your hands, generating no rent for months on end, you might be
interested in a newly launched enterprise that promises to remove
such worries.
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