Last weekend, I went with some friends to a “Help to Buy” property event. I wanted to expand my knowledge of the market in the UK and see what options are out there.
It was quite interesting going there with no expectations. I don’t want to buy a primary residence anytime soon; hell I don’t even know what country I want to live in next! There seemed to be a fair bit of scaremongering happening with the emphasis on properties going like hot cakes which makes the whole thing even more stressful.
Rather depressingly, translating ‘mortgage’ from French to English means ‘death pledge’. I don’t want to have a mortgage until I die! It is such a big commitment and I’ve been reading recently articles that question whether it is a good thing to buy. This great article from Afford Anything takes issue with the assumption that renting is “throwing money away” and she makes a great point by highlighting the huge number of factors that should influence your decision. These include how long you expect to live there; alternative investment options; assumptions about inflation; and the often forgotten home maintenance payments. And so on.
key takeaways for me from the property event
- If you haven’t come across it before, property lingo is like another language. What is the difference between a mortgage broker and a financial adviser? Do you need both or just one? Stamp duty isn’t on stamps? It’s really worth reading up around it before jumping into research.
- Mortgage providers like to see that you can commit to consistently making a payment. This increases your credit score. Ironically, in order to have good enough credit to be considered for a mortgage, it is highly likely you will need to have a credit card… and be in debt.
- There are lots of hidden expenses to take account of! Anything from the financial adviser, paying stamp duty (a tax on the transfer of ownership documents), even travel/time to view the properties and talk to the estate agents.
there is more than one option
If like me, you want to use property to your advantage and add it to your asset draw, there are more options that just a traditional or even new government-created models of investments.
- Buy to Let
- A British phrase where a property is purchased with the specific purpose for renting it out rather than living in it. It would not be your primary residence. A ‘buy to let’ mortgage is needed for these kind of investments which have more criteria to fulfil.
- Also known as ‘flipping’. The property is bought often at a low price (because of the market conditions or in need of repair) and adding value to it before reselling for a profit. This can be done by adding extra rooms, repainting, redecorating… you name it! It is important to renovate the property with the desired buyer in mind rather than what you think looks good.
- Holiday Let
- What it says on the tin. Buy a property in a holiday destination and let it out to people. AirBnb had a huge impact on this market. I recently read about Zeona McIntyre who made her money from renting out properties via AirBnb and now teaches others to do the same (when she’s not being an international pet sitter that is!).
- Commercial Property
- Anything from shops, hotels. offices, car parks (something I would love to invest in!), warehouses. Gives you the opportunity to buy and rent.
- Short for “house in multiple occupation” and is a house where more than 3 tenants live. It doesn’t count if it’s a family home! Can be profitable as you usually get at least three separate rents from one house. For example, instead of a family paying £1000 a month rent, you could have 3 people each paying £600 a month rent. Have additional licensing regulations and mortgages.
- Off plan
- This was a property term I’ve only just come across. It is where the property is sold or purchases before it is built and with only the plans available for inspection. The developer often will guarantee a certain value of rental yield in the first year or two once they have been built.
Property is something I am really keen to invest more in and learn lots about. Is it something you would want to include in your wealth portfolio?