10 TIPS FOR SOUTH AFRICANS INVESTING IN UNITED KINGDOM PROPERTY

10 TIPS FOR SOUTH AFRICANS INVESTING IN UNITED KINGDOM PROPERTY

United Kingdom property offers South Africans an opportunity to develop their wealth and enjoy monthly cash returns in sterling.

Buy-to-let is a massive business in the country, now exceeding £1 trillion, with many investors building lucrative property portfolios over 7 to 15 years. The UK offers a stable currency, and demand from tenants is at an all-time high.

However, it can be a daunting task, says Anthony Doyle from UK-based Propwealth, a property investment company catering to South Africans.

South Africans are often caught up in the emotional aspects of UK property, he says. “Don’t fall for this approach and be guided purely by rental yields. Never get caught out by glossy sales brochures and stick to these ten key points to reduce your risk.”

1. Be Prepared

It’s important that before you even commence with investing in the UK, you have an offshore bank account set up, have Reserve Bank clearance for transfer of funds and are basically ready to pounce when a deal comes up.

2. Investment Location and yields

Try to focus on larger cities like Manchester and Birmingham, as central London has flat-lined. Outside of London, one buys for cash flow and capital growth in the medium term. Focus on neighbourhoods of regeneration, as there are many.

Liverpool, for instance, is a growing city, which is spending billions of pounds on upgrading, attracting new businesses and is one of the top student and tourist destinations in the United Kingdom. A rule of thumb on yields – look at gross yields in large cities of 5% and in cities like Liverpool a 9% gross yield is very achievable.

3. Work with partners you can trust.

Make sure you work with a reputable developer, rental agents and management teams. Propwealth was set up as a facilitator for all these aspects and uses a network of professionals from accountants to maintenance people in the UK.

4. Legal aspects

When one invests in the UK, you use your own solicitor to look after the process of property purchasing. The solicitor will deal directly with the seller’s solicitor and verify everything that is presented as part of the sale. It protects your interests completely and offers not only transparency, but also complete peace of mind, especially if you are “distance investing”. In many parts of the UK, councils have introduced Landlord Licensing in response to eradicating rogue landlords. You will be registered via the managing agents when you have a tenant.

5. Management of the property

It’s important to cost in the collection fees for rental agents (usually 10% to12%). Reputable agents source, screen and manage the tenants, but also will take care of any issues during the tenancy period like repairs and maintenance. It is very important that you have full management in place when investing long distance as it reduces risks.

6. Tenanting procedures

Screening of tenants is extremely important. You must insist that the managing agents had done credit checks, previous landlord referencing, affordability checks and hold at least one month’s rental deposit in the UK Government bonding scheme.

When tenanting it’s not the first tenant you take, but rather the right tenant, and this can sometimes take time. The best tenant is someone who stays, pays and looks after the property as if it’s his or her own home.

7. Accounting and tax

Be aware of your tax obligations, as it’s an important aspect in buy-to-let. Even owning one property makes it a small business. Be prepared for this and use a UK-based accountant to assist with the tax as well as registration as non-resident landlord status.

Some investors set up limited companies, which is another vehicle for developing a portfolio

8. Financing

At the moment, offshore mortgages are only granted to non-UK resident investors over a purchase amount of £80 000. The banks work on a maximum lend of 60% loan-to-value and work by the same affordability criteria as South African banks.

Below this threshold investors are buying with cash and getting returns of 7% net, excluding capital growth, which is far above bank interest rates.

9. Watch the hidden costs and other marketing hype

Take into consideration all the hidden costs, which eat away at the gross yields. These can include levies, ground rents, mortgages, maintenance allowances and void periods (when you have no tenants). Also take into consideration the accounting fees of structures like limited companies and the annual tax returns.

Furthermore, stay clear of development companies offering guaranteed rental returns. These are never market-related and are built into the sale price. The student property market is a true example of this with a potential market bubble developing here.

10. Exiting the investment

Go into an investment with an exit in mind. For buy-to-let, the exit is very often the first-time buyer or, if you buy correctly with good yields, another investor and as long as you have bought property with a good history of rental income.

“In summary “ says Doyle, “ you should find value when you buy, the property must be close to transport, offer good facilities, have a clean, modern interior and be in a region of regeneration. This is the secret of UK property investing, as you will always have a tenant.

“The UK population is growing every year and many people have no option but to rent. And finally, remember property is not a get-rich-quick scheme, but rather a steady and gradual path to independent wealth.”

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Nigerians in South Africa
Nigerians in South Africa 1742 posts

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