Despite a volatile market and tough tax changes, investing in property is still a good bet. The value of your property is likely to increase in the long term, while in the ‘short-term’ you can achieve a healthy monthly income - provided you invest in the right property in the right location.
And that’s where Portico Portfolio comes in. There is so much for landlords and investors to think about today, from tax laws and new regulations to yields, locations and furnishings, that we decided to launch a property portfolio service to take the guesswork out of investing.
So if you’re interested in investing in bricks and mortar, here’s our investment property tips for 2019 and beyond, plus everything you need to know about Portico Portfolio.
Investment property tips
1. Location is everything when it comes to buy-to-let
If you want to invest wisely in today’s market, you need to think: location, location, location. Even in a weak market, areas undergoing infrastructure investment and regeneration will likely still see steady growth – both in yield and in capital appreciation.
The high street is also a great indicator of the demographic of an area, and whether the area is in decline or has growth potential. For example, have there been many changes recently? Are shops closing down with no sign of opening or are they closing with new names moving in? Is money being spent by the council to smarten it up?
The team at Portico Portfolio use years of market experience and expert knowledge to source profitable investment properties in up and coming areas.
And two cities currently undergoing substantial regeneration and significant investment are Liverpool and Manchester.
Related: The Booming Liverpool Property Market
2. Rental yields show substantial local variation, so drill down to postcode level
The North typically offers lower entry costs and higher yields for property investors, leaving room for much higher returns than the capital.
Data from our London rental yield map reveals the average long-let rental yield in London varies substantially across the boroughs, from 1.5% to 6.7%. In Liverpool, however, the average long-let rental yield comes in at 8.3% with the highest yield in the city sitting at an impressive 13.6%. Manchester also boasts strong yields with the average standing at 6.5% and the highest at 7.6%.
With both North Western cities seeing a boom in regeneration and tourism, landlords of short-term lets are seeing even stronger yields. As Airbnb occupancy is limited to 90 days in London, it’s not a viable long-term alternative to buy-to-let in the capital. However, since Liverpool and Manchester don’t have these Airbnb restrictions, landlords and investors can maximise income throughout the year and generate substantially better yields than long-term lets.
Our recent research has revealed that landlords and Airbnb hosts of short-term lets in Liverpool are achieving especially high returns. In Fairfield, landlords with short-term rentals can earn staggering yields of 27.2%. Interestingly, out of the 10 top performing locations in the North West, eight are Liverpool postcodes.
Related: Best Yields For Short-Term Lets Are Found In Liverpool
3. Look at property price growth trends - increases are expected ‘up north’
Despite property prices in London plateauing, largely due to economic uncertainty, the North is seeing impressive growth.
In the past five years, Manchester has already seen a whopping 47.76% increase in average property prices, according to our analysis of Land Registry data. The average price was £119,951 in June 2013 and shot up to £177,243 in June 2018. Liverpool has also seen impressive house price growth in the last five years, shooting up 19.34% from £108,267 in June 2013 to £129,562 in the same month in 2018.
And there’s no sign of this property price growth stopping. Reports indicate that the north west will likely enjoy continued increases in property prices over the next five years of a minimum of 21.6%.
Liverpool and Manchester have shown resilience through economic uncertainty and are expected to be less impacted by Brexit compared to London. This impressive growth trend can be attributed to a number of things; more companies are relocating to the North, bringing more people and increasing demand in the rental market. On top of that, regeneration plans and government policies, including the Northern Powerhouse, are also contributing to strong economic growth across the region.
How Portico Portfolio can help landlords invest in Liverpool and Manchester
If you would like to take advantage of these high returns and potential for capital growth, we can help.
Portico Portfolio combines our lettings knowledge and Portico Host service with our financial and tax expertise to generate impressive and tax-efficient yields for property investors.
To start using Portico Portfolio, you first need to decide on an investment budget between £150k - £500k. We then have a simple, streamlined process to help you make the most out of your property portfolio:
Setting up a tax-efficient company structure
Portico Portfolio is in partnership with top London accountants, Accounts & Legal, who will handle the tax-related operations. The team will set up a special purpose limited company from the outset to act as the investment vehicle. The client will be the 100% shareholder, but the properties will be owned within a company structure, which brings numerous benefits.
This setup makes the mortgage interest tax deductible and income can be taken as dividends or retained in the company for a later tax-efficient exit. As properties in Liverpool and Manchester will be the focus, the lower property prices there will attract less stamp duty.
Moreover, since Airbnb income is subject to VAT, the portfolio will also be optimised to be under the VAT threshold. Long-let rentals can be combined with Airbnb short-term lets to generate a larger diversified investment that’s tax efficient.
Sourcing profitable properties in the right locations
The Portico Portfolio team will then find profitable investment properties and manage the entire process. From sourcing a property all the way to exchange, we take care of everything you need.
We have properties available exclusively through Portico Portfolio, but we also source strategic properties from the open market in lucrative city centre locations in Liverpool and Manchester. It typically takes about 3 to 6 months to assemble the portfolio.
Managing the property portfolio to bring you the best returns
Portico Portfolio also manages the property portfolio while you control the portfolio and earn monthly dividends. Once a property is secured, we will manage it with Portico Lettings, or Portico Host services where applicable. Clients are also free to buy or sell the properties whenever they like or can sell or transfer the shares in the company to someone else at any time.
Here’s an example portfolio with a £600k budget and a target location of Liverpool:
Let’s say you have a budget of £600k and would like to invest in short-let properties in Liverpool’s city centre. In this example, there are four properties, three two-beds and one three-bed, with a total purchase price coming to £573,800.
The total gross income, which is the income from Airbnb rental after the Airbnb fee, is projected to be £84,863 per annum. The total net income, which is the gross income after cleaning, linen, utilities, and Portico’s management fee, is estimated to come to £48,927 per year. Having no mortgage presents the opportunity for an 8.5% yield, while a 50% LTV mortgage could help you earn a 12.1% yield.
Here’s another example portfolio with the same budget, but this time in Manchester:
And finally, here’s a third example property portfolio with a budget of £1 million and properties in both Liverpool and Manchester.
What does it include?
While stamp duty, furniture and furnishings, and mortgage arrangement fees aren’t included, the setup fee and purchase process include:
- Company formation
- Opening a company bank account
- Property search
- Negotiation of purchases
- Conveyancing and solicitors’ costs
- Broker fee for mortgage search
With Airbnb properties, cleaning and linen costs are paid by the guests, while council tax and utility bills are deducted directly from your Airbnb income. Maintenance costs and mortgage interest costs are not included, but the Airbnb and long-let percentage fees cover:
- Taking bookings
- Providing access to guests
- Organising cleaning and linen
- First year’s bookkeeping
- Xero software subscription
- Annual accounts
If you’d like to get started with Portico Portfolio, you need to decide on a few details relating to your property portfolio, including:
- Investment budget
- Investment type (Airbnb, Assured Shorthold Tenancy, or both)
- Investment location (Liverpool, Manchester, or both)
- Target LTV (typically 50% but ranges from 0% to 75%)
- Limited company structure (share ownership and funding timescales)
Of course we can advise you on this too if you like.
Get in touch and make smarter investment decisions!
Our experience as a leading UK sales and lettings agency, along with our accountancy partners Accounts & Legal, will help you generate high returns and maximise tax efficiency, so you can get the most out of your property portfolio.
If this sounds interesting, give us a call on 0207 099 4000!!!!! or email firstname.lastname@example.org for more details. Click the link for an instant sales or rental property valuation in just 60 seconds.