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In part 2 of Liquid Expat Mortgages’ UK Expat and Foreign Nationals Guide for Beginners’ Buy-to-Let, we look at where to buy your UK investment property using a UK expat or foreign national mortgage.
The property.
Once you have made all the initial considerations that we outlined in part one, it’s time to start looking at which property you want to invest in. There will be a number of main things to think about here:
- The location.
- The rental yield.
- The type of property.
- The mortgage and using a mortgage broker.
The Location.
When it comes to an investment property, you need to look for a location with a high rental demand. This will make sure that your property will let as quickly and efficiently as possible – minimising costly void periods. It will also mean that you can command a higher price since high demand will mean it is more competitive to secure a rental property. While measuring rental demand can be difficult, keeping an eye on how quickly properties are selling, population growth, and the rate of increase in house and rent prices will all be strong indicators. Considering the wants and needs of your target tenant will also be important. If you want to attract a particular type of tenant, understanding the type of location in which your ideal tenant wants to live might even be more important than the rental demand in the area.
Another factor that will dictate the location of your property are the capital growth rates in the area. Higher capital growth rates will mean that you stand to make more from your investment property in the long term as the capital growth indicates the price growth of your property over time. The North West is currently leading the pack on capital growth rates, with Savills projecting a 28.8% rise by 2025. Comparatively, London is projected to have the lowest capital growth rate in the UK – just 12.6%.
Read more about capital growth rates here.
The Rental Yield.
While choosing a property location with high rental demand and strong capital growth potential will point you in the right direction, it’s important to also consider the rental yields you are likely to see from your investment. This figure indicates the return you’re receiving on your investment. When it comes to investing in a UK property as a UK expat or foreign national investor, the higher the rental yield, the better. Generally, a yield of 5-6% will be considered a very strong rental yield. Looking at data for the average rent and average property price in the area you are looking at will be helpful when calculating the potential rental yield of the property you are looking to secure a UK expat or foreign national mortgage on.
It is important to balance the rental yield of your property with the capital growth potential when deciding on where to invest. Of course, strength in both these areas will mean a very strong investment. But you may wish to prioritise one more than the other when looking for an investment property. For example, if you are looking for your investment to help with your retirement, you are likely to choose a property with high capital growth potential. On the other hand, if you are looking to subsidise your income, you should prioritise a property with strong rental yields.
Learn more about the highest rental yields in the UK here.
Type of Property.
Residential property.
The most obvious type of property for UK expats and foreign nationals is the residential property. It is certainly the type of mortgage that we discuss most with UK expats and foreign nationals and a great place to start your investment journey. And it’s not surprising that so many UK expat and foreign national investors are keen to get a residential buy-to-let mortgage, with the pros of this type of investment vastly outweighing the cons.
In short, purchasing a residential buy-to-let property with a UK expat or foreign national mortgage will allow you to earn regular monthly income through rent; see long-term returns through capital growth; allow for a wide pool of potential renters; offer a relatively simple and accessible tool to get involved in the property investment market; and offer a low-risk investment proposition because of the massive demand for rental properties in the UK market. On the other hand, the cons of buying a residential investment property include the risk of potential void periods (which are of course minimised by choosing the right property), and the fact that it is a longer-term investment strategy and won’t offer instant returns.
Read more here.
Student property.
Student property is really seeing a boom in the UK expat and foreign national mortgage market at the moment. This is partly due to the record number of international students attending UK universities at the moment. There is no sign of the student market shrinking either, with estimates that there will be a further 500,000 students studying in the UK by 2030. Many international students are looking for high quality, purpose-built accommodation and new UK expat and foreign national student mortgages are aiding investors in purchasing these types of property to satisfy the surging demand. The monthly rental returns on student properties are typically higher than with a residential buy-to-let. Though the capital growth potential with a student rental property is not as high as with a residential buy-to-let, the huge rental demand and usually hands-off nature is still attractive to many UK expat and foreign national investors.
Read more here.
Holiday let.
Holiday lets are currently immensely popular with UK expat and foreign national investors using UK expat and foreign national mortgages. This form of let is extremely profitable and investors are likely to see huge returns. However, this form of let is usually highly seasonal and this will be something to account for when planning your investment. While this could potentially discourage some UK expat and foreign national investors, there are many tax benefits to be had from this type of investment – for example, you can claim mortgage interest as a tax expense. Further, staycations are likely to continue their boom for the foreseeable future as swathes of people continue to be discouraged from foreign travel. Properties in tourist hotspots can also prove to be expensive so if you are planning on a holiday let mortgage in a tourist hotspot, you can expect to need a larger deposit than if you were buying a traditional buy-to-let.
Read more here.
Off-plan.
Off-plan properties are an excellent choice for those UK expat and foreign national investors that are looking to buy a property in a quality area for as cheaply as possible. Off-plan properties are those that are available to buy using a UK expat or foreign national mortgage before they are completed. Off-plan is typically much cheaper than buying a completed property and this allows greater scope for capital growth and a higher rental yield when the property is completed and let. Buying off-plan is usually a more flexible way to buy an investment property too as many developers will allow choices of fixtures and fittings. However, buying off-plan will require a great deal more due diligence and research than a traditional property. This is because there are many more risks when buying off-plan. For example, there are no guarantees that the finished product looks like what you’ve bought or that the developer will finish the property. While this can seem discouraging, with the right mortgage broker and advice, the likelihood of this is low. Due diligence goes a long way when it comes to off-plan and will be the most important thing if you are looking to secure an off-plan UK expat or foreign national mortgage.
Read more here.
Mortgage.
UK expat and foreign national mortgages have greatly improved in the last few years. With an increasing marketplace for this type of mortgage, lenders have been steadily creating tailored mortgages to satisfy demand from UK expat and foreign national borrowers. The advent of so many new products has massively improved the accessibility of UK property investment for UK expats and foreign nationals. One of the best things you can do when trying to secure a UK expat or foreign national mortgage is to retain the services of a specialist expat mortgage broker.
While many mortgage advisers will tell you that it is not possible to get a UK mortgage as a UK expat or foreign national living and working abroad, this is often because they’re not familiar with expat and foreign national mortgages. Though it has historically been more difficult to get a UK mortgage from abroad, the advent of specialist expat mortgage brokers, like Liquid Expat Mortgages, has made it far easier as they cater to that specific sector of the market and often have access to exclusive deals not available on the high street. It’s also likely that the process of getting a UK expat mortgage will be far easier, quicker and cheaper with a broker as they will know the lenders that are best for your personal circumstances.
There is currently a ridiculously wide range of choice available – ranging from buy-to-let, residential, off-plan, and even green mortgages – to UK expats at the minute and the roster of lenders that are offering UK expat and foreign national-specific deals is growing all the time. Increasingly, the UK mortgage market is realising that the UK expat community is an incredibly lucrative sector and they are developing new and innovative products for these consumers all the time.
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: +44 (0) 161 871 1216
www.liquidexpatmortgages.com
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