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Nicholas Statman- Which property types offer the best return on investment?

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Nick Statman ROI

Property Expert Nicholas “Nick” Statman on Property Investment ROI:

It’s no secret that investing in property can be a profitable strategy. But deciding to invest in property is only the beginning. One of the biggest decisions you will make as an investor is deciding what type of property will generate the highest return on your investment. You could invest in vacant land, or single-family homes or commercial buildings. You could specialize in strictly residential property, or branch out and invest in retail space or industrial space. 

If you aren’t sure which type of property to start with, consider these four types of property and how they can impact your ROI:

Residential

Investing in residential property is commonly the first step that new investors make when developing their portfolio. This typically looks like purchasing a single-family home or flat, fixing it up, and renting it out to tenants. Buying a home that needs a little bit of work allows you to purchase a home for under market value, make the necessary renovations to increase the home’s value, and then either sell it for a profit or rent it out to generate a monthly income. 

Many investors aim for a rental yield of 7%, but with a great location, an upgraded property, and a steady and stable economy, investors can see closer to 10%. The average return on investment for residential property is anywhere between 1% and 4%. 

Industrial

Industrial property generates higher yields because there is more space available to be rented. More space means more tenants, and more tenants mean higher rental income. When dealing with industrial property, you’re also working with net leases and more extended lease agreements. These properties often see lower turnover rates than residential properties, and tenants typically take more responsibility for the upkeep of the space, which means less work for the landlord. Investing in industrial space requires more capital upfront, and can be more expensive to maintain in terms of repairs and regular maintenance. 

Commercial

While commercial buildings typically cost more upfront then a residential investment, commercial properties usually see an annual return of anywhere between 6% and 12% of the purchase price, depending on where you buy. This type of investment is an excellent choice for landlords and investors who want to take a more hands-off approach to their investment. Tenants in commercial properties tend to take responsibility for maintenance and repairs of their space and are intentional about the upkeep of the building. This means less work for the landlord and fewer maintenance-related costs. 

Commercial properties have the most significant potential for higher cash flow, see lower vacancy rates, and typically deal with longer, more stable lease periods. 

Mixed-Use

A mixed-use property is typically a property that has commercial space on the ground floor, such as a retail shop or a restaurant, and then an area for residential living space on top. Since the building is classified as commercial, the stamp duty is lower, but it also means it can’t be purchased with a traditional buy-to-let mortgage. The price for a mixed use property depends on the location, for instance you can find a traditional mixed use property for £300,000 in London and £150,000 in Aberdeen. Returns vary based on the type of establishment taking up space in the commercial area of the building, the average rental rates and the number of tenants that occupy the residential portion of the building. 

The best type of property investment depends on your specific goals. If you want a more hands-off approach, you may want to invest in commercial or industrial property. If you are looking for something that doesn’t require a lot of capital upfront, a small residential property in need of minimal repairs might be the best place for your investment. Most investors start with residential properties and then diversify their portfolios with commercial or industrial properties to increase cash flow. 

Another post on “How to Calculate the ROI on a Rental Property

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Nick Statman- How To Identify The Perfect Buy-To-Let Property For You

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Nick Statman on Buy to let property

Property Expert Nicholas “Nick” Statman on spotting profitable buy-to-let properties:

There is no secret formula or special checklist that can define the perfect buy-to-let property. The right property depends on your experience, your expertise, your budget, and your financial goals. While a three-bedroom flat in London might be the perfect investment property for you, someone else might need far less space or a completely different location. 

The perfect buy to let property for you will be based on these four things:

Tenant Profile

The right property for you will cater to the specific buyer that is most likely to rent in your area. For example, if your property is located near a University and in a neighbourhood popular with University students, you will want to find a property that is conducive to this type of tenant. This means looking for a multi-bedroom flat or single-family home that could accommodate roommates, has room for an office, or is close to public transportation. Check out other properties that cater to university students and compare your property with theirs in terms of monthly rental rates and amenities. If the property you’re looking into doesn’t cater to the type of tenant that is most likely to be interested in the property, it may not be the right buy-to-let property for you. 

Rental Yield

Your rental yield is your annual rental income, as a percentage of the total value of the property.  To find the rental yield of a property you must first calculate the annual rental income for that property. Then you divide that number by the property value. Lastly, multiply that figure by 100 to get the percentage. For example, if your annual rental income was £12,000, and the property was valued at £200,000, your rental yield would be 6%. This could be considered average in some areas and low in others, just depending on where you purchase your property and the condition of the local property market. 

Potential To Add Value

There are two types of investors: One that looks for properties that need a lot of work, and one that looks for properties that need very little work. Choosing a property that requires minimal repairs means you’re ready to jump from buying to letting in a short amount of time. This also means you can start earning money faster. But homes that need considerable repairs also have the potential of increasing their value. Sometimes, just a small refurbishment (£3,000-£7 pounds) could dramatically increase the value of the home and your return. 

If you have the resources, expertise, and experience to complete the necessary repairs, a home that needs to be refurbished may be an opportunity to increase your return. If home repairs are not your specialty, the right buy-to-let property will require very minimal maintenance. 

Area

It’s not an industry secret that location plays a significant role in how successful an investment property will be. The perfect buy-to-let property will be in an area that has both homeowners and long-term renters. It can be hard to determine how an area will grow in 5-10 years, but choosing an area that seems to be growing and evolving will usually work in your favor as an investor. Look for highly sought after cities and then broaden your search to areas just outside to neighbouring suburbs. You may be able to find affordable properties in an area that might be next in line for development. Of course, properties zoned for good schools and those in areas with low crime are usually popular with tenants and, therefore, smart investment options. 

There are a lot of benefits to investing in buy-to-let properties. They allow for long-term investment and growth, generate a significant income, and many of the costs associated with this type of property can be offset against taxes. 

There’s no way to define a perfect by to let property, but if the property aligns with your financial goals and looks like a profitable investment when all four of these features are considered,, then chances are it is the right property for you.

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Nick Statman- 3 Property Data Sources Every Investor Should Be Using

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Nick Statman

Property Expert Nick Statman shares his insight on Property Data Sources for Investors.

Property investing is a game of numbers. There are so many facts, figures, and analytics to consider, and sometimes it can be overwhelming to understand it all. What makes it even more challenging is that there are so many different places to gather information, it can be hard to know which source is the most accurate. As we all know, just because it’s online doesn’t mean it’s true, which is why it’s so important to find a trustworthy source for property data. 

If you’re not sure where to get accurate and up-to-date information, consider these three reliable property data sources:

Property Data

Residential property investors, agents, and developers use Propertydata.co.uk for all of their market data and analytical needs. The website makes it easy to identify yourself as an investor, developer, or agent and customize the information and resources that you see based on your position in the industry. 

This website allows you to break property data down by the national level and the local level. With postcode tables, maps, and charts, you can visually see all of the essential data about a specific market. This dynamic website also gives agents and investors insights to yield hot spots, growth zones, and can even help break down costs for building new construction. The charts library lets you navigate hundreds of analytical charts based on house prices, market trends, and local economic data. These tools are helpful for investors who are looking for property data across the UK

If you are looking for more local data, the user-friendly search option lets you search for property data based on local prices, local rent prices, volume, growth, and local yields. You can also filter your search by types of investment properties, including repossessed lots, properties at auction, short leases, and new builds. 

Other helpful tools this website has to offer include:

  • Property Valuations
  • Mortgage Finders
  • Stamp Duty calculators
  • Build cost calculators and 
  • Yield calculators 

Property Data offers three monthly plans for agents and investors:

The Basic Plan costs £12 a month and gives you 12 credits per month to use to access main search features such as local data searches and property valuations. With the Basic plan, you are allowed to save three local searches and three plots.

The Pro Plan is the most popular plan and is £20 a month. With this plan you get 60 credits to use, 12 saved local searches and 12 saved plots. The Property Data sourcing feature contains a curated list of select situation properties that are divided into 11 regions. With the Pro Plan, you have access to one region of your choice and can pay extra for access to other areas. 

The Max plan is £40 a month and gives you unlimited credits, unlimited local searches, unlimited plots, and access to all of the sourcing regions. You also can access the postcode table, download your results to PDF, and can add additional users for £15 a month. A free trial is available for each plan. 

With Property Data, there are no limits during the 14-day free trial, and all plans have unrestricted access to local data throughout the UK. 

HM Land Registry

HM Land Registry is part of the UK government site that provides no-frills information about local and national property data. This easy to use website allows users to search home prices, title deeds, and search for property ownership information. This site hosts a variety of property data resources, such as introductory guides to registering land, updating property records, and joint property ownership. 

It also has an entire section devoted to the breakdown of any fees associated with property investing Scale 1 and Scale 2 fees, application fees, and detailed information about how and when to pay these fees. 

The easy-to-use search features allow you to look up information in England or Wales, even if you don’t own it. You can use the address search feature to find the owner of a particular property, or look into it’s flood risk and see visuals of its perimeter and property lines. You will need an email address and a debit/credit card to perform basic searches. A basic search will tell you:

  • The name of the current owner and the address of the property
  • The price that was paid for the property. This information will not be available if they purchase the property before April of 2000, paid less than £100 for it, or if the HM land registry has agreed not to record the price
  • The name of the lender for the property if there is a current mortgage being paid on the property

This basic search will cost you £3 inc VAT. The website’s “Find a property service” allows you to find and download “Copies of title registers, title plans and Flood Risk Indicator results for more than 20 million registered properties in England and Wales.” The cost for each of these searches is:

  • £3 for a title register copy (details of a property)
  • £3 for each title plan (plan of a property)
  • £9.00 (excluding VAT) for each Flood Risk Indicator result

Rightmove

Rightmove is one of the UK’s most popular property buying, selling, and investing websites. It allows you to search property prices and market trends easily and pull up price comparison reports. Enter any information you have about a city or neighbourhood and instantly see current homes for sale and their most recent list prices. If you want information about a particular property, simply enter the address and Rightmove will give you all relevant data concerning the property.

By creating a Rightmove account, you can save your searches, create instant property alerts, and create/save your own search areas. Access to property data on Rightmove is always free.

A smart and successful investment starts with having all the right information on hand. There is a lot of information out there on the internet, so you have to be very selective. These sources have earned a reputation for providing current and accurate information about properties all across the UK and can be a helpful resource when buying or selling UK property. 

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