UK Property Investment Opportunities

First Property Investment (FPI) enables individual investors to buy generally brand new properties in attractive parts of London (currently including Maida Vale, Wimbledon and Battersea). As a buyer you pay 25 per cent less than the market value (which is fixed by independent survey), then you hand the apartment over to FPI to let out and manage and forget about it for the next 12 years. During that time you receive a fixed 2 per cent income - regardless of any void periods and with no further costs or fees to pay.

At the end of the 12-year period the property is handed back without tenants - it’s then up to you to rent it out again or sell it and realise the full capital growth (which of course includes the 25 per cent discount). FPI, meanwhile, has been making its profit through the rental return generated.

UK Property Investment Opportunities - The Market

“It’s also a good scheme for tax purposes,” he says, “because after 12 years of taper relief, you pay only 24 per cent on any capital growth in capital gains tax, instead of 40 per cent.” Moreover, if your 25 per cent discount takes the price below £250,000 then you avoid the stamp duty hike, which hits buyers hard at that level.

UK Property Investment Opportunities - Finance Your Investment

Lenders will typically expect a gross rental income of at least 130 per cent of the mortgage repayments, though some, such as RBSI, take a more flexible approach and are more interested in your overall ability to service the debt than in exactly where the money comes from.

Good deals for non-residents include a Woolwich rate exclusive to John Charcol of bank base-rate, plus 0.9 per cent for the life of the loan; if you want a fixed rate, Woolwich is also offering 6.99 per cent for five years. Northern has a two-year fix at 6.25 per cent, while Barclays’ tracker is available at bank base-rate plus 0.75 per cent for five years. “Basically, Northern is good for fixes, while Barclays and RBSI are good for floating
mortgages,” says Ray Boulger.

UK Property Investment Opportunities & Richard Donnell

A note of caution: Richard Donnell of FPD Savills research team points out that over two fifths of prime tenants in the London rental market are from North America. “The outlook for London depends on your view of the risk of recession in the US and its impact on the global economy as a whole,” he says.

Fix or float? “Usually, buy-to-let borrowers feel happier with the certainty of fixed rates, but interest rates still seem to be falling. One possibility is a ‘tracker droplock’, which initially tracks the base rate but gives the option of fixing it at a later date,” says Ray Boulger.

If you decide to look for a rental property yourself, remember the importance in London of the underground: Boulger suggests properties just inside Zone 2 have a big rental advantage over those further out.

If you’re spending a large sum (say £500,000 to £1 million), it generally makes sense to buy several smaller units rather than one big one, as you’re less exposed to void periods and yields tend to be higher.

UK Property Investment Opportunities - Property Investment

Property investment is as much of a specialism as any other type of investment - take expert advice on where and what to buy. Specialist outfits such as LCP will take on the whole package, from purchase to rental management.

For more relevant news items and magazine articles please click the links below:

Magazine Section - Property. Useful collection of articles

Article: Where to Invest in 2009 - Property

Article: 20 Things You Need To Know About ... Buying Property Abroad