Buy to Let Property in London
- Buy To Let property investment in London is a popular way to grow wealth and generate stable income.
- Population growth, increasing inward migration, rising number of households, economic growth and international investors have been driving demand which historically exceeded supply of London property leading to long term price growth. For example, irrespective of a global financial crisis and market fall in 2008, during March 2007 – March 2017 London property prices rose by 68% (source: Hometrack). In addition to capital growth, buy to let property returns 2-4% net from rental profit. Return on invested capital has been higher for investors who used low cost mortgage to finance property acquisition.
- Due to recovering UK economy and low exchange rate for British pound, London property market offers attractive opportunities for long term buy to let investors. However, different market segments perform differently and segment and property selection are key to superior performance. For example, during 2014-2017 many investors in London suffered double digit negative returns on their property investment while our clients enjoyed positive double digit returns. Superior performance requires research, experience, right strategies and contacts to identify right segments and properties, negotiate terms, structure transactions, and execute them swiftly.
London Property helps investors to maximise return on invested capital taking advantage of:
- Exchange rate cycles
- Price cycles in different property market segments
- Area / location dynamics
- Project and unit specifics
- Negotiation strategies
- Financial leverage and cost of financing
- Tax strategies
- Transaction tactics
Example: higher return from financial leverage
Property investors can benefit from London property investment with financial leverage by:
- investing in off plan property with a low deposit (10-20% until completion of construction) or
- using low cost mortgage to finance up to 75% of a property value
Case study: buy to let mortgage
Property price GBP 1,000,000
Deposit: GBP 250,000
Mortgage: GBP 750,000
Rental income after service charge: GBP 35,000
Interest cost @ 3%: 750,000 x 3% = 22,500
Rental profit after interest cost: 12,500
Return on capital invested from rental profit: 12,500 / 250,000 = 5%
Return on capital invested from capital growth assuming price growth by 7% per annuam (7% of 1,000,000 is 70,000) = 70,000 / 250,000 = 28%
Total return on capital invested: 33%, due to financial leverage / low cost mortgage
Case study: off plan property
Property price GBP 1,000,000
Deposit before completion of construction: GBP 200,000
Assumption: price growth by 10% (10% of 1,000,000 is 100,000) during construction
Return on capital invested if sold before completion: 100,000 / 200,000 = 50%
Buy to Let Property Investment: Our Services
We do extensive research using publications of leading property consultancies and government development plans to recommend segments and areas for property investment. In selected segment and location, we search for the best property in terms of its characteristics and price.
It is hard for an investor to find a right property investment because it requires:
- understanding of market segments and development plans of authorities
- understanding prospects of regions and areas
- significant time and effort to research and contact numerious property agents
- network of contacts of dedicated property professionals
- using appropriate negotiation and execution tactics, etc.
Price per square meter in the same area can differ as much as 10% without a clear reason. Finding right deals can provide immediate savings to a buyer. On top of that, we normally achieve 2-6% of price reduction through negotiations with a seller or her agent.
London Property provides active portfolio management which creates value in addition to property price appreciation. For example, a passive investment of GBP 500,000 in a flat worth GBP 2,500,000 (GBP 2,000,000 financed by a mortgage) would be worth over GBP 4,000,000 in 10 years if market grows 5% annually, and an investor's equity would be worth over GBP 2,000,000 (the rest - a mortgage obligation). If a portfolio is managed actively, the same GBP 500,000 at the same market growth rate of 5% could grow into over GBP 3,500,000 in the investor's equity in 10 years .
Our fees depend on value and complexity of a transaction. They range from 0% (when buying from some of developers) to 2% (when buying resale properties) of transaction value.
There is no multi-listing system in the UK and no database holds information on all properties for sale. There are hundreds of estate agents across London offering thousands of flats and houses for sale. Property agents are contracted by a seller to act in the best interest of a seller, not of a buyer. Moreover, the most sought after flats and houses are not listed on the internet and prices are frequently not transparent.
London Property can represent a buyer, help to secure the best property at a fair price, save time and avoid expensive mistakes.