Property investment in the UK, especially the London property market, can be a lucrative way to make your money work for you. Statistics show that average house prices in the UK have nearly doubled since 2009. And London has been ranked as one of the top cities in the world for property investment.

Current house prices and demand for affordable housing mean that now is a great time for property investors to purchase rental properties.

Making a wise and profitable investment in the property market depends on several factors. These are location, property type, demand, and financial implications. For example, it’s crucial to consider the cost of stamp duty, capital gains taxes, mortgage rates, and property taxes.

In this article, we will share six ‘actually useful’ tips for property investors on ensuring financial stability when buying an investment house or flat.

1. Pay attention to rental demand

Analysing the local property rental market to assess demand is crucial. High demand means a steady stream of reliable tenants willing to pay higher monthly rent rates. If you are thinking about a buy-to-let strategy, you must buy a property to match the type of tenant you hope to attract.

Related: Rental market trends you need to know.

2. Work out whether you can afford to invest in property

To be a successful property investor, it’s vital to have enough capital to finance the deal. Therefore, you must analyse your income, expenditure, savings, and other investments. For example, you will need a mortgage deposit, which may be more expensive than buying a primary residence. 

Additionally, you should calculate if rental income from a buy-to-let property is enough to cover mortgage payments.

3. Understand taxes and fees when investing in property

As a property investor, you should know there is more to think about than the property purchase price and rental demand. You have various taxes to consider. For example, you are liable for stamp duty when purchasing an investment property. And when you sell it, you will be responsible for paying Capital Gains Tax on your profit.

In addition, you will be liable to pay income tax, possibly inheritance tax and annual tax on enveloped dwellings (ATED).

4. Shop around to find the best mortgage rates

It is worth getting a mortgage advisor to ensure you get the best rates – whether you have a buy-to-let mortgage or bridging loan. However, in some cases, you can get a better deal going directly to a mortgage lender. It is also crucial to factor in set-up fees and interest rates when comparing mortgage costs.

It is also good to remember that your credit score, loan-to-value (LTV) rate, deposit, and loan term all impact mortgage interest payments.

5. Make your investment profitable

It makes financial sense to consider ways to maximise your return on investment. This could include making property improvements, adding more space or updating fixtures. Improving the property could boost rental income or let you sell the property for a higher price.

Therefore, always have an exit strategy when buying a buy-to-let property. For example, can you sell the property for a profit if the rental market changes? Or is it worth keeping the property, so its value increases?

6. Get a good property accountant

All investors need a good accountant. However, property investors need someone to operate the business in the most tax-efficient manner. Therefore, an accountant well-versed in the nuances of property investing can advise on the best strategies for reducing your tax liabilities and maximising profits.

Additionally, they must keep up with ever-changing rental laws and taxation legislation.

Investing in London Property Market

Are you considering buying investment property in London? If so, call Hastings International to get the best investment advice. Our team of expert estate agents are on hand to answer your questions and find the best investment deals for you.