An incredibly common new year’s resolution for many UK expats and foreign nationals is to buy a UK investment property using a UK expat or foreign national mortgage. Since UK property is a tried and tested investment vehicle and a relatively stable asset class, buying a UK investment property with a UK expat or foreign national mortgage can be an incredibly lucrative venture for prospective investors. But, if you’ve never invested in property, it can be a daunting task. To help, Liquid Expat Mortgages presents its two-part UK Expat and Foreign Nationals Guide for Beginners’ Buy-to-Let! In this part, we look at the considerations you need to make before looking for a UK investment property.
Beginners’ Buy-t0-Let: Getting Started.
Before getting started, you need to ask yourself a few questions:
- What do you want from your investment?
- What are the risks and what are the rewards?
- What will my responsibilities be? And can I manage them?
What Do You Want?
When looking to get a UK expat or foreign national mortgage, deciding what you want from your investment will massively influence the course you take with your investment. For example, if you are planning for your retirement, you are likely to buy a different property than if you were looking to simply add extra income to your pay packet. If you are buying an investment property for your retirement, you will probably look for a property that has a high likelihood of its capital value appreciating by a large sum. That way, when you sell the property in your retirement, you can take a large lump sum from the sale to contribute to your pension packet. On the other hand, if you are looking to add more money to your monthly salary, your main consideration in looking for a property will be the strength of the rental yield as this will determine how much you earn on a monthly basis.
Weigh the Risks and Rewards.
Every investment has an inherent risk to it and no asset is totally stable. We have seen an excellent case study for this exact phenomenon in the last couple of years: the Covid-19 pandemic has exemplified just how changeable market conditions are. In this instance, the property market was positively affected – with demand and prices rising massively. However, the converse can just as easily happen, and some analysts are predicting price correction over the next few years.
On the other hand, property investment is typically much safer than other types of investment and property is a more reliable asset class than competing assets, such as stocks. Stocks are prone to fluctuate massively, whereas the housing market is relatively stable and prone to a quicker recovery if prices do radically alter.
Other risks to consider are how your income might become adversely affected by differing factors other than fluctuation in the value of the asset. One notable risk would be changes to legislation or tax rules. For example, a recent legislative change to the rules around mortgage interest tax relief has hit many UK expat and foreign national landlords hard, impacting profit margins. Incoming legislation means that from 2025 landlords will not be able to accept new tenants if their EPC rating is a D or below. This is another example of a legislative change that is bound to be costly to UK expat and foreign national landlords.
Another inevitable cost to factor into any risk assessment before buying a property is void periods. Your property is almost certainly going to have void periods. However, by choosing the right type of property in the right area, you can minimise void periods and make sure that your profits stay as high as possible.
When weighing the risks of property investment, it’s important to remember that the rewards of property investment can be huge. While a property can afford you a monthly income through the rental yields, property investment means that you will also earn through capital growth – the value by which your property appreciates over the duration of your ownership. In this sense, your property serves as a long-term savings vehicle. Property investment can also be highly flexible and there are a wide range of available property types from long-term lets, student properties, holiday lets and off-plan, meaning that you can tailor your investment to your needs and maximise profitability. With a range of mortgage options available for UK expats and foreign nationals, investing in UK property is well within reach for many prospective investors, making it an excellent way to begin building an investment portfolio.
Understanding your responsibilities as a UK expat or foreign national landlord is one of the most important things you need to be aware of before beginning your investment journey. If you find the right property and have the sufficient deposit, this isn’t the end of the story. You will have to arrange a mortgage with a lender which can be difficult for UK expats and foreign nationals as many Highstreet lenders in the UK will be reluctant to lend to these customers. Luckily, there are many specialist lenders that are willing to lend to UK expats and foreign nationals and this market is growing constantly meaning there are new mortgage deals available to UK expats and foreign nationals all the time.
Supposing that your mortgage and offer are accepted, you will need to hire a conveyancer, conduct surveys, exchange contracts, pay the appropriate legal fees including stamp duty land tax, set your rent to an appropriate level and make sure your property is ‘up to spec’. This will include making sure that your property meets gas, electrical and fire safety standards. Once your property is let to tenants, your responsibilities as a UK expat or foreign national landlord will only increase. For example, you will be responsible for certain repairs and maintenance on the property. These include any structural issues with the property, the property’s plumbing, heating, gas and electrical problems.
The last thing to be aware of is your tenant’s rights. These will be important when understanding your responsibilities to your tenant and minimising any issues that might arise. Of course, if you are using a property management company then your investment will be more hands off than if you were to manage the letting of the property yourself. This will lessen your responsibilities greatly. However, if you do opt to use a property management agency, you need to account for how this will impact your profits and make sure that you are still able to make your investment financially worthwhile.
Now that we have covered the basic considerations you need to make while deciding to invest in a UK property as a UK expat or foreign national, we will move on to look at what you should consider when looking for an investment property.
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: +44 (0) 161 871 1216
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