When starting out in property investment overseas and not being familiar with the U.K., choosing your assets correctly is highly important for your long-term success. While some opportunities might seem tempting, there can be hidden risks that might affect your journey.
To ensure you have a strong and safe start in U.K. property investment, let Value Invest research share 8 type of properties you should avoid:
1 – Properties With Non-Standard Construction
The term ‘non-standard construction’ refers to houses built with unusual materials (e.g. concrete or wood) instead of typical brick or stone with tiled roofs. These properties can face challenges with financing and insurance, which can also lower the potential future resale value.
2 – Properties With Subsidence
Subsidence is what happens when the ground underneath a property sinks, altering its foundation by moving it. Although repairs can resolve this issue, the history of it in a property lowers its attractiveness and makes it less appealing to buyers, tenants, lenders and insurers, and, unless fixed, reduces its overall market value by a staggering 40%.
3 – Low-Cost Properties in Unfavorable Locations
Location is the most significant factor to succeed well on the U.K. property market. While some house prices might seem attractive, ensuring a good location with good connections such as, for instance, a London commuter town (e.g. Luton, London) will attract quality tenants and avoid your investment turning into a liability.
4 – Listed Properties
Properties on the national list for their heritage value face government restrictions that affect renovations or even repairs. The associated costs and legal requirements bring challenges to these homes that will be difficult to manage for a new investor inexperienced in the U.K real estate.
5 – Student-only Housing Complexes
Purpose-built student accommodations are typically marketed as high-yield investments with easy management. However, a limited tenant demographic (students) may result in higher vacancy rates, specifically during university downtimes. Capital growth is usually slower in these cases, and resale potential might be lower than expected.
6 – Properties With Negative Cash Flow
New investors should be cautious with assets where the costs exceed the income generated. Negative cash flow results in money loss and can rapidly drain your funds.
7 – Short Leasehold Properties
New investors should prefer properties with leases of 150 years or more and carefully review the lease terms. Assets with leasehold agreements shorter than 125 years can come with costs such as higher ground rent or service charges.
8 – Areas with Low Rental Demand
Investing in areas with low demand in rentals, such as those without schools, employers, or transportation options carries a lot of risk to your capital appreciation. It’s important to analyze the local market thoroughly to ensure demand will be strong enough to support your investment.
9 – Hotel Rooms
Investing in hotel rooms shares many of the same risks as student pods, including a narrow market for resale and dependency on a specific business model. As with student pods, guaranteed initial returns may not last, and future income can be uncertain..
While some investors may excel with these properties, it requires a level of experience and risk tolerance not advised for those just starting out their property investment journey. New investors should prioritize reliable and straightforward investments to build a strong foundation.
Investing in the UK property market requires thorough research to make sure you’re investing in the right areas, trust in the developers, and patience until completion. With the help of our expert team in Value Invest, we can guide your way to wealth accumulation.
Value invest identifies exceptional properties, pools together the resources of individual investors and purchases properties at a discounted prices:
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