Real Estate Matters | What’s hot and what’s not in the UK?

Sam Lee

With all the talk of Brexit, a weak pound and recent stamp duty rises of 3%, are there still safe opportunities to invest in the UK real estate market and make healthy returns?

Simply put, there are probably more opportunities now than ever in the UK. Investors may just have to work a little harder and think slightly outside of the box to find them.

JML’s Managing Director Keith is back and forwards to his mother country on whistle-stop tours to explore new investment opportunities for both JML clients and himself.

Here are three 2018 UK real estate opportunities that are particularly interesting;

Holiday Homes – Cornwall

The UK’s most southwesterly county has always enjoyed a buoyant real estate market, even in times of trouble elsewhere in the country. A massive long-term undersupply of housing coupled with rising demand for second homes from out of county holiday-home buyers keep prices steadily rising and rental values high.

A project called Hilgrove Mews has properties available in the popular holiday town of Newquay, Cornwall from as little as HKD 2,500,000. Demonstrating rental yields of 5%, local house price growth in the last five years was an index beating 23.9%. Using both historic house price growth and current rental yields as a guide, this property could return investors a whopping $1,222,500 over five years.

Top tip – Choose a property near the ocean to take advantage of high yields and the potential of holiday letting for additional rental premiums.

Secured Property Lending

In the last 10 years the UK the concept of crowdfunding real estate investments has become popular. Crowdfunding companies essentially cut out the middleman, in this case the bank, by linking investors and property developers together without taking the huge margins that the banks ordinarily take and simply charging an arrangement fee.

In general, UK crowdfunding investors have enjoyed consistent, property based returns of up to 8% per annum.

Some savvy developers have now gone a step further by cutting out the crowdfunding company altogether and passing on the fee savings directly to the investors using Secured Loan Notes and paying interest as high as 10% per annum.

UK SLN investors enjoy the benefits of having no Stamp Duty, legal fees, property maintenance or bad tenants to worry about, as well as a fixed timeframe for repayment.

Top tip – Choose a developer with a proven track record of completed projects and with an FCA regulated security trustee appointed to act as custodian of the pledged assets.

Joint Venture Partnership

Developers in the UK have been using the Joint Venture model for years and it is probably the most recognised and well trodden method of investing in property developments.

In a nutshell, a developer sources a property to develop, invests the initial seed funding and then reaches out to other investors to make up the difference to acquire and develop the property. All of the investors and the developer have equity in the project and make a profit in line with the financial success of the project.

Investors can take a complete back seat and leave the developer to manage the project entirely, or be more actively involved day-to-day.

Because your money is not secured against a property in a JV investment as it is with a Secured Loan Note, both the financial rewards and risks are higher.

However, risks can be minimized by conducting thorough due diligence and working with a developer who you can trust.

Top Tip – Getting involved in an investor in JV projects can give you an ‘inside look’ into how projects are carried out and can be a great way to learn about real estate investing and developments.

Sam Lee is a marketing manager and property consultant at JML Property.  JML was established in 1994 and offers Investment Property & Homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.

www.JMLProperty.com

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