Buy-to-let has never been more popular: there are more than a million buy-to-let properties in the UK, and buy-to-let mortgages total over £85bn. News on the Block recently met two investors who are breaking new ground in this area.
Buy-to-let mortgages have been around since 1996, but have dramatically changed the shape of residential property investment. They have provided the man in the street easier access to property investments than ever before and these days it’s not unusual for people to own a second, third or even fourth home. However, with interest rates creeping higher, and banks still as keen as ever to lend, it has never been more important to be well informed and take a strategic view when investing in residential property.
Property portfolio managers Young Group do just that. They advise their clients on residential investment strategy and in just over three years have transacted on over 1,000 flats, with a combined value of more than £360m. They recommend that investors take a long-term view, making sure that their investment portfolio is financed to suit their own specific circumstances.
Young Group warn that it’s those investors who jump on the buy-to-let bandwagon without thoroughly researching the available opportunities, or even having a strategy in place, that will miss out on the benefits that buy-to-let can bring.
Young Group started life in 2003, when husband-and-wife team Neil and Sylvana Young realised the potential of turning what had become a hobby into a fully-fledged business.
Management accountant, Neil Young, and his surveyor wife, Sylvana, were working in Hong Kong but were keen to remain firmly on the property ladder back home in the UK. They rented out their two-bedroom flat in Ealing, west London, and by strategically refinancing were able to build up a portfolio of investment properties during the few years that they were working in the Far East.
Neil and Sylvana’s friends and family saw the success they were experiencing with their investments and began asking for advice on the buy-to-let market. The seed was planted and, initially through referrals from friends and family, Young Group was born and began to thrive.
From humble beginnings in 2003, January 2005 saw Young Group take on a dedicated sales manager, and move to offices in Swiss Cottage, London. In the early days, they purchased a handful of units at a time, but now the team were taking on whole developments to offer to their investor clients.
Foresaw the benefits
However, the firm’s ethos remained the same: identifying areas which would benefit from infrastructure development or regeneration initiatives. For example, Young Group invested in Dalston in 2006, purchasing 34 units at The Interchange. They foresaw the benefits the 2012 Olympics and the planned extension to the East London tube line would bring to east London. A year later regeneration of the area is underway, with uplift in value of one-bedroom units of £30,000, underlining that thorough research is the key to sound property investment.
The team is now 15 strong and provides property portfolio management services to private investors from across the globe. Young Group identifies the best off-plan opportunities in London and can manage clients’ entire investment process – from sourcing the property through to financing, letting and even furnishing.
Rather than merely acting as an agent or broker, Young Group owns all the property that it offers to clients, and also retains around 10 per cent of properties for its own portfolio, so has a commitment and vested interest in the success of the investment properties that it recommends to clients.
The company’s focus remains in London where demand for rental property is buoyed by inward migration, the growth of the City’s financial status, and a population that is marrying later and living longer.
Its latest development, The Landmark, is a fabulous 30-storey, 276 apartment, luxury tower located in Canary Wharf. With the area’s burgeoning workforce set to swell to 200,000 in the next 20 years and a shortage of good housing stock, the development is a prime example of Young Group spotting and negotiating the best buy-to-let deals that the capital has to offer. Good people to do business with? Absolutely.
Summary of top tips for investors:
Young Group recommends the following checklist for investors looking to invest in residential property:
1) Thorough research is the key. Know the area you are buying into. Regeneration plans and new tube stations are great indicators of up and coming areas. Apply the 10-minute rule for access to transport links, bars, clubs, restaurants and local amenities.
2) Location. Consider who your ideal tenants will be and buy property that they’ll be keen to rent.
3) Buy well. Consider both price and content. Research prices in the area and look for comparables. Can white goods or flooring be included in the deal? But beware of deals that look too good to be true; they usually are.
4) Take a long-term view and make sure that the numbers work. Most wealth is created through capital appreciation, so buy a property that supports this type of growth. Ensure you include all costs in your financial evaluation such as legal fees, stamp duty, service charge and ground rent, etc.
5) Appoint advisors you can trust. For example a regulated advisor can secure the best mortgage deals, free from fees and aligned to your investment strategy. Good letting agents will minimise void periods.