Why is it so difficult to invest in real estate in the United Kingdom?
November 27, 2019Want to earn from a hassle-free investment?
December 1, 2019
Nowadays it is very easy to get into a number of problems when investing in properties.
With all the rules and regulations associated with property investing, it is pretty much impossible to deal with the property investment yourself without making errors.
Although it is wise to have money invested and properties seem to be a secure option for the majority of us it is even wiser to invest smartly. Let’s check some of the mistakes that can be made.
Have a GOAL.

Invest because the price will go up... Well, you invest in the property if it is a good deal. It has to be Below Market Value. If you buy a property worth £200,000 for the same price it is not an investment but a gamble. Don’t believe people when they say - "don’t worry the prices will go up." We all know they do not always go up and you may be disappointed. Do you know anyone with negative equity after 2007:(?
Invest in rent only. Unless you are in a position to buy property for cash or with a hefty deposit as an inexperienced investor you should avoid buying properties for pure rental income. It is very easy to calculate. Typical rental yield is in the area of 5-6%. So, if (currently at the end of 2018) the average buy-to-let fixed rate deal is close to 4% and it is close to all the time lowest, we might expect those rates to increase to about 6-7% in the next few years. Bear in mind that an extra 2% can be added as the expense for maintenance, void periods, and eviction problems. It will simply kill all profit and especially those clients with repayment mortgages will suffer as it very likely that their mortgage payments will exceed rental income.
Rental income stress rate. It sounds very tricky and it is even worse. Nowadays it is not just Loan To Value being calculated but also rental income. And you may have a mortgage payment of let’s say £400 and rent of £1000 but the bank still says it is not affordable to have a 75% LTV mortgage. It is down to their calculation of mortgage payments based on worst case scenarios... A very big problem in all properties above £200k and even bigger even you are a higher-income taxpayer.
Tax avoidance. No matter how loudly everyone speaks about it and regardless of how hefty fines investors pay, it is still often practised. Let’s face it - cash payment for rental payment is accepted but has to be declared and preferably paid into bank account first and how about “forgetting” to declare capital gain on property sale? Probably in a few years to come, we will be a society with only electronic payments available and further introduction of Blockchain technology could put an end to that problem. For now, just hefty fines and inability to obtain the mortgage without proof of rental payments prevents some of the investors continuing with such a high-risk strategy.
Not meeting Council and legal regulations. Regulations exist because there is a need for it. Weather you like it or not you will need to comply with them as it is the law. So if you want to risk being prosecuted in case of a fire in an overcrowded property or no fire risk complied property then this is also up to you. Is a few quid savings or few quid extra in your pocket worth risking others lives or your own personal life and pretty much ending so-called investor “career” in properties. Not meeting regulations can stop investors from owning any more investment property in the future from both legal and possibly can force the investor to sell the property by the lender.
Not complying with lenders criteria. So you bought a residential property and you wish to rent it out you need to get consent to let from the lender. If you let property as multi let your mortgage HAS TO be for multi let property. If not you seriously risk having your property being even repossessed for not complying with the mortgage deed. For HMOs - how long does it take for someone calls Council after a party in your HMO. Then how long will it take for the lender to find it out.
Hands-on approach. Investments = you invest your money, not your time. With one single let you may not see it as the major obstacle but... it still takes your time and by far usually, you are not the professional to deal with the majority of things. Are you a letting agent, accountant, maintenance man, solicitor and estate agent at the same time? No, so you delegate - it is investment then and not wasting your valuable private time.
Sell. Profit is from the sale. So if you think that you achieved your financial target be brave to sell the property. It is only then when you can sell you are a successful investor.
And above are only issues with a mortgage. There are plenty more...
If you are looking for a modern, uncomplicated, safe and hassle-free way to make your money grow, then Crowdfunding Place might be the investment solution you’ve been waiting for.
For more information, or to invest, please visit our website or call us on +44 203 642 41 74