If you’ve ever thought about buying property in Europe, the United Kingdom is the best place to look.
Despite the political uncertainty and slowing global economic growth, the UK’s real estate market is picking up. The Financial Times point to several reasons why, such as ultra-low mortgage rates and buyers who are tired of renting. Either way, the opportunity is there, and real estate now is more affordable than ever, as houses that would have cost £2 million (SGD3.52 million) in early 2014 (considered the peak of the real estate market in the UK) can now be bought for around £1.3 million (SGD2.29 million) — that’s a 33% discount!
If you’ve decided that you want to take advantage of an opportunity like this, then take note that the climate, regulations, and lifestyle are very different in the UK compared to Singapore, so there are different factors that have to be considered when looking at real estate. That said, we’ve outlined a few things to look at so you can head to the UK well-informed about what to buy.
Understand the difference between leasehold and freehold properties
In the UK, you can buy a house in its entirety or “lease” it for as long as 999 years, called a freehold or leasehold, respectively. Real estate agents usually gloss over these terms, so it’s important to understand them as getting it wrong could cost you a lot.
KTMF defines freehold properties as real estate where you own the building and land it stands on, whereas leasehold properties are those that are leased from a freeholder (or landlord). As a real estate investor, you’d typically go for freehold properties, so make sure to ask the agent you’re talking to if the property you’re looking at is leasehold or freehold to avoid any costly mistakes.
Research any hidden costs
In our guide to ‘Buying Overseas Properties? 3 Things to Look Out For’, we highlighted how hidden costs are always a factor when doing business in another country — and the UK is no exception. In fact, The Independent points out that you could spend up to £4,000 (SGD7,032) on hidden fees alone, and nobody wants that. This includes things like legal fees (£1,614.27 or SGD2,838 on average), mortgage valuation (£209.44 or SGD368.25), or energy performance certificates (£25.09 or SGD44.11), among others. That said, it’s important to ensure that whomever you’re dealing with, whether it be the broker, seller of the house, or agent, that they let you know about all the costs upfront.
Check the plumbing
The climate in the UK is significantly colder than in Singapore, making the heating system in the property something you have to think about. If you’re having second thoughts, installing a heater or boiler worth £2,000 (SGD3,516) by yourself, it’s important to understand that it can add up to £8,000 (SGD14,065.96) in value to the property. That said, it will need year-round maintenance checks, and it’s best to protect an expensive system with insurance especially if you won’t be around all the time. UK company HomeServe point out that heater insurance can cost as little as £8 (SGD 14) a month, which is a small price to pay if an expensive system has an issue. Your tenant will also appreciate the added insulation, and may even opt to lease longer — giving you a more consistent source of income.
Look at the roof
When looking at property, one of the most expensive things to repair, and often overlooked, is the roof. Well-maintained roofs can last up to 30 years, but if you notice a tile is missing or poor quality shingles are used, you might be looking at a replacement sooner than you think. That said, it pays to have it inspected by a professional, so that they can also check for dry rot, which causes sagging or crumbling, and working drainage systems. If it looks like the roof should be replaced soon, don’t turn it away just yet. This is Money’s Marc Shoffman reports that a new roof can return up to 63% on your investment, which is a benefit as a new roof can also be a definite selling point for some tenants — a win-win situation for either side.
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