Richard Butler Creagh Tips in Property Investment

Welcome to the Richard Butler Creagh property blog.  Here we share golden tips to consider before taking the plunge into property investment. Richard Butler Creagh is the founder of Henley Finance which was established in 2013 and it is a short-term bridging finance company specializing in loans between three months to a year, of between £100,000 to £1,000,000 for the professional property developer. Read on to find more tips before buying that first rental property.

As a property investor it is important to decide on whether to invest time to build houses or flats. In recent years the market in London has changed. There is more demand for flats than houses in London and in fact, is often harder to sell a residential house than a flat. There is a misconception that flats on long leases are to be handed over to after it expires, yet years spent in industry has shown that it is extremely easy to renew the lease with the landlord. Thus, theoretically, the temporary purchase can be permanent in practice.

In densely populated areas flats are more economically viable options. Often old houses which predominately are large have been converted to flats due to profitability associated with it. Large houses are popular among investors due to the ability of conversion into flats. Conversion of a 5 bedroom house into 2/3 flats often yields a substantial return on the investment. This is the main reason why some of the houses become expensive and also in limited quantities.

The sociological factors of changing today’s society are the main cause of the change in housing habits. Houses today are not passed from one generation to the next. Those are more like accommodation for the family which changes on a remortgage. Further, only one or two generations live together i.e. parents and their children. Big houses are not needed to accommodate today’s average family and flats are better suited for this purpose.

The cheaper prices when buying flats mean that the potential investor can build the portfolio quicker. However, the financial instruments tend to require a lower Loan to Value (LTV) due to complications with the types of flats. The leasehold creates time constraints, especially if a mortgage will be 25 years. The LTV will be calculated by deducting the length of the mortgage from the leasehold.

Another limitation of flats is that the flats subject to the consent of the freeholder. This can prolong any work that needs to be carried out and create unnecessary hurdles for investment. Further, issues arise when the flats are part of a large block of flats the neighbors disapprove of the works. Houses enable freedom of investment and most importantly it is one of cost without having to increase the lease before it runs out at a significant cost.

Ultimately an investor is going to look at the yield compared with the investment. The cheaper flats are often attractive to new investors because of the low entry level however an inexperienced investor may fall into may legal traps. There is no perfect answer, however, it is good practice to consider the area and the potential mortgage costs as it may differ from leasehold to freehold.

Richard Butler Creagh is a financial consultant and founded Henley Finance in 2013. After a successful career in property development, he understood the needs of the professional and their requirements in short-term bridging finance and devised a way that they could be better met in Henley Finance. Find out more about property financing on the Richard Butler Creagh official website. Follow Richard Butler Creagh on his official Twitter page here and read Richard Butler Creagh news and updates here.