Aiming for a better return

Property investment is a bit like playing to win at Wimbledon – A return that is better than your opponents will win the game possibly also set and match!

Property investment has traditionally been a function of the property type and location, hence market, the tenant covenant and the lease of the occupier. Those rules were straight forward to follow and the purchase of this income reflected the risks compared with equity and other financial investments.

Over the past 12 months especially there has been aggressive lending as banks aim for a greater market share to satisfy shareholders. The UK and in particular London has become a mecca for overseas investors keen to soak up the money that is obviously sloshing around. Any one wanting a slice of the action has had to pay the going rate.

We consider that returns particularly on commercial property have reduced to an alarming low level. A property purchase can provide an income from a tenant but what about purchase costs, stamp duty land tax, costs of any alteration/improvement? Then heaven forbid what if the tenant went to the wall? Costs of re-letting and finally what if interest rates used to finance the loan in the first place rise?

Hopefully through all this play will remain in court, be played to the rules and as we see in the news not succumb to the widening net of the fraud that massaged rental income to secure greater lending.

IFA’s with Chartered Valuation Surveyors need to advise property investors to:

• Keep within the game plan.
• Keep within the rules.
• Keep within the top seeds
• Aim for a consistent better return

This is part of a regular series of topical articles provided exclusively by  RDN Surveyors.  If you would like further information or add your comments please reply to this e-mail or contact Roger Nelson on 0800 902 0466.