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For all investors, the first step required in investing in property is having all the required finances set out. This includes setting budgets, saving the correct amount for a deposit, looking into mortgage options and making sure there is money for any legal costs and fees.
It is important to note that a buy-to-let mortgage requires a 25% deposit, which is significantly higher than the 5-15% that is generally required for owner-occupier mortgages. So, knowing what type of property to invest in and how much deposit is required to start is important.
The upfront cost is slightly higher for buy-to-let properties due to the higher mortgage deposits. For example, if a person has a £25,000 cash deposit available, the maximum cost of a buy-to-let would be £100,000. Whereas purchasing a home to live in usually requires a 10% deposit so £25,000 would get you a £250,000 property. Even though buy-to-let mortgages require a larger upfront cost, they usually require less money overall as once a property is tenanted, the rents should cover the mortgage payments. Meaning you don’t have to fund it yourself.
Researching the market is one of the main parts of investing in property as this will determine whether investors will benefit from capital appreciation, a high demand, strong rental income and more. First-time buyers should look deeply into locations and neighbourhoods and what each area has to offer for an investment hotspot. Investors should be making sure the property is likely to produce the income and profit margin they are aiming for to reach their goals.
Furthermore, researching the area and the current market will also provide an excellent overview of possible rental rates. It is important to look at the upcoming hotspots to get the chance to grab a property at a lower price. However, in a few years, the value could potentially increase due to the demand and market activity changing.
Looking at Leeds, the average house price in May 2023 was £237,043. According to Land Registry, that is a 6.1% increase from the same time in 2022. Therefore, property investors in Leeds will have seen considerable capital appreciation on their property.
When looking for a buy-to-let property, it is important to consider the different types of properties available that would attract tenants. Factors to consider would include the number of bedrooms, accommodation type, parking availability, and projected rental income. All these factors will influence the demand for the property and ultimately affect the ROI that investors can achieve. It is important to consider the location and the local amenities that potential buyers will seek to make the property more appealing to the target audience. Take note of what people are looking to buy and the features they would like in or around their homes to make the property stand out.
Finding the right professionals to work with is one of the most crucial steps in investing in property. Professionals can ensure the investment goes through correctly and quickly by providing information to help first-time buyers finalise and secure their investment. Here at CityRise, we have a large team of experienced professionals who are always happy to help and support investors through their journey. First-time buyers may not always know where to start when investing in property; that’s where we come in to help guide them through the process. All investors should also consult with mortgage professionals to ensure they get the correct mortgage at the best rate.
The period between reserving a property and exchanging contracts is the main part of the purchasing journey. This stage is referred to as the ‘sales progression process’, and it involves many parties. Including solicitors, mortgage brokers, surveyors, the seller, and the buyer. At CityRise, our After Sales team makes sure all this is coordinated and ensures the property exchange is smooth and that no unnecessary delays or issues occur.
Once the reservation fee is received, all the Memorandum of Sale instructions will be sent to the developer’s solicitor to create the necessary paperwork to complete the purchase. At this stage, investors should look to find a solicitor. At CityRise, we do have a recommended solicitor that we suggest investors use to speed up the process. The solicitor will receive the Memorandum of Sale. Then investors will be issued the initial client care letters to sign, which will contain personal and property details, and usually search fees.
Once the solicitor receives contracts, completes the initial checks on the buyers, and receives the search results, they can start reviewing the documents. The developer’s solicitor will respond to any questions and answer all enquiries raised by the buyer’s solicitor whilst reviewing the documents. Once all enquiries have been answered satisfactorily, the contracts will be sent to the buyer to sign and return.
Once all the legal contracts are signed and returned, investors will need to transfer the deposit funds. Then they will also provide written authorisation that they are happy to exchange. It is crucial to start organising these funds or submit the mortgage application around 3-4 months before the practical completion of the development. Both solicitors will aim to get contracts exchanged quickly after the authority has been provided.
Once completed, the property is now owned by the buyer! During this stage, investors will be required to pay any stamp duty, complete the registration, and obtain title deeds and documents. Finally, the property is ready, and investors can start looking for tenants. Investors can also decide they want a more hands-off investment and don’t want to manage the property directly.
If a buyer prefers to take a hands-off approach to being a landlord, then allow CityRise to take the burden of managing them. Our team of lettings professionals can manage a property from start to finish. We provide secure, fast occupancies with professional tenants and ensure renewals are a seamless process, limiting any potential void periods. Our team will promote the property to find the right tenants. Once the apartment is tenanted, we will provide the tenants with high-quality, attentive, professional care. Eventually, once the tenancy finishes, our team will follow aftercare protocol. Ensuring the property has been properly maintained and is ready for the arrival of new tenants.
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