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Being an Overseas Landlord in London (A Foreign Investors Guide)

Do you live outside of the UK and want to
buy an investment property in London? Well watch this video to find out everything you
need to know to not just find the right property, and to look after it. Hi I’m Ugo Arinzeh with Onyx Property Consultants
and Keller Williams. If you’re new to my channel please make
sure to subscribe and hit the notification bell, as I put out weekly videos on moving over to London and
investing in this fabulous city. As a London property agent, I worked with
countless buyers and investors to help them find the perfect home in this capital city.
Having moved over from America myself, I know what it’s like to be an expat looking to buy and invest in London, so I specialise in working with international clients
to help them find their perfect home. In today’s video we’re going to be sharing with you everything you need to know to buy an investment property in London.
It’s part of my Investing in London series so make sure to check out all the other videos associated with this topic. So the first thing you’ll need to consider when buying a property is what is your budget, The average house prices in London is about £470,000 which equates to about $580,000 so we are talking about a considerable amount of money that you’re going to need to look to invest in, if you want to get started. not to say there aren’t cheaper properties, but you’re going to be talking about at least investing $600,000 US dollars to get started. Once you know your budget, you’ll need to consider do you have enough cash to purchase the property, If you need a mortgage in London, it’s not so
straightforward so you want to talk to a financial advisor to get all your choices. Some
of the things you’ll need to consider as if you are going to get a mortgage,
is whether you want a fixed or variable rate. If you do a fixed rate, you’ll maybe get 3, 5 years, and occasionally they’ll do up to 10 years, but it’s not like in America where you can have 30 year fixed mortgages and you’re not exposed to interest rate changes, here if you do lock in a rate, you’re not going to have it for very long, so you want to make sure you are budgeting and can forecast a little bit where you think interest rates are going to go, because you are going to need to accommodate those changes in interest rates down the line. The next think you’re going to need to think about if you’re moving money over, is currency rate exposure, which will impact the amount of pounds you actually end up with. The good thing is for my American clients moving dollars over, they’re actually in a great position because of the relative weakening
of the pound compared to the dollar, which is primarily as a result of the Brexit referendum that was announced in 2016, ever since then the pound has dropped and weakened considerably, therefore the US Dollar has been relatively much stronger compared to where it has been historically. This chart shows that back 5 years ago in October 2014 if you had £1 it would get you something in the range of $.160, today, that same £1 will only earn you in the range of about $1.23. Said another way, just on that factor alone with the comparison we have just shown, it means that you need 23% less dollars for the same amount of £’s or you can buy a house that is worth 23% more for the same amount of money that you would have had to bring over 5 years ago. So, if you were looking to buy a £1million property, here in the UK 5 years ago, it would have taken you $1.55M, today that same property would only cost $1.23M, so again a significant savings in terms of amount of dollars it’s going to take you to buy that property. Now offsetting those currency gains, you would
have to pay higher stamp duty costs. Stamp duty is a tax on purchase that’s charged on properties purchased here in the UK Make sure you watch my video on Stamp Duty where I explain everything you need to know on this critical component on your budget. Other factors to consider in your budget are also conveyancing costs, any transfer costs, if you’re setting up a property to be owned in an offshore vehicle, all of those things you’re going to want to factor in. So once you’re really clear on budget and
what it’s going to take to actually purchase the property, you’ll next need to consider the type of
where you want to live. So, for example, many Chinese buyers have bought a lot of property in
east London as they have a preference for new build properties and there have been a load
of units coming up in areas around Canary Wharf and the Docklands. Some investors have
also bought a bit around the Nine Elms and at the Battersea Power Stations
south of the river, there has been a ton of new development going on, primarily was driven by the US embassy moving its headquarters from Grosvenor Square, in Prime Central London, to Nine Elms, and that has a whole massive redevelopment going on including two new tube stations, and a whole new city that’s being developed. Apple is actually committed to putting their Headquarters out in that campus out in that area as well. However, as of right now, we’ve seen quite a bit of saturation of units on the market and not enough buyers taking place, so it’s not something I would likely encourage unless you’re in a position where you’ve got cash an ability to buy-up these properties at great value, perhaps hold them, recognising that it’s going to be several years out before those units are absorbed and you start seeing appreciation down the road. If new build is not for you, and you want more of a classic type of property, then areas that are very popular for expats are South Kensington
or Notting Hill. Now, they are at a higher price point definitely they are areas that are very appealing to expats Make sure you check out my recent video on the Best Areas to live as an Expat
as well as my other video on different property types around London explained, so you’ll know all your choices and what would be best for you. So are you thinking about investing in the
London property market? Make sure to leave me a comment below, and let me know what you’re thinking about. So beyond budget, and affordability,
next you’ll need to think about why exactly you are investing in the London Property Market. Is it for cash flow and yields, or is it for long term appreciation? Personally, I have invested in property both here and in America, so I am a big advocate of buying and investing in property as a source of wealth creation and net worth. Having said that, buying a property in London is not so straightforward, and easy to get a yield return on it because property prices relative to the rental income you can get is not really in alignment. Having said that, owning a property in London doesn’t necessarily provide people with the highest rental yields, why? Because the cost of owning the property relative to the rent you receive is quite high. In the past, people and investors have accepted a lower yield, in return for longer term appreciation. So, Average yields in London hover
average around 4% which is not impressive when you consider secondary markets like Liverpool are generating yields around 12%. But, having said that, a property you would have bought in London in 1998 at, say, £115,000 would be worth £671,000 today, An increase of over 400%. So if you are willing to take a long term hold position on London property market, in the past, and hopefully going forward you’ll get a long-term capital appreciation on that investment. Another point to comment on about budget and cash flow is that, as a non resident landlord you are required under the government’s Non Residential Landlord Scheme to register otherwise, if you don’t, any tenant or agent that is collecting rental income on your behalf is compelled to withhold 20% of that net rental income and pay it into the government on your behalf. You can register, and basically get into the government system, notifying them that you do generate a tax return, and therefore you can get your gross yield returned to you, but if you don’t, you’re going to have to have that income withheld on your behalf. If you want to know more about this topic, I am going to include a link on that so you can make sure you get all the information you need about the government Non-residential landlord scheme. There are other tax implications associated with owning property in London and we have had some recent changes so make sure you watch my other videos to keep up on those changes as well, so you’ll know everything you need to know about the tax implications of owning property here in the UK. So in this video we’ve covered things to
consider as a foreign investor including Budget affordability, we’ve talked
about your Financing Options, Currency Exposure and Stamp Duty and how they will impact your
budget. I’ve given you some thoughts on where to invest and the
different property types so you can factor those in as well. All of these things will impact your Rental
Yield and Long Term Appreciation which which is really is the driver to your long term strategy and why you’d want to invest. We also talked about the Non Residential Landlord Scheme to make sure you that you know what you need to do to stay in compliance, and how that can affect the rental income you’ll ultimately receive. So after the last several years we have seen lots of changes that are impacting Landlords and the returns that they are getting, we have seen tax changes, we have seen Brexit, we’ve seen stamp duty impact, all of those things have had adverse affects on landlords and their appreciation and return. Having said that, with property prices coming down so significantly over the last several
years and especially as a foreign investor or a US Dollar based investor, I believe it’s still a fantastic time to own a rental property, if it suits and matches to your long term strategy. it’s a great window of opportunity and something that we’re seeing savvy buyers take advantage of. So if you want to know more about investing in
property and have any questions about it, click the link below in the comments and register for my newsletter where I send out regular newsletters on the London property market, share top tips, as well as featuring properties that you might want to consider to buy. So has this video been helpful? Make sure
to hit like and leave me a comment telling me what you enjoyed about it, or if you have any questions about the London property market, make sure to check out some of my other videos where you can get great helpful tips about investing in property, the London property market, and living in this fabulous city. So that’s Ugo Arinzeh with Onyx Property
Consultants and Keller Williams. Bye for now!

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