What is a Buy-to-Sell Investment Strategy and why does it matter?

We’ve looked before at the importance of an investment strategy, and covered the most popular buy-to-let strategy in some detail, here.

As we’ve said before, a strategy is essential. And there are only two real strategies that, as an investor, you’ll need to use. 

Two fundamental strategies

Either: an investor buys a property and rents it out to create a future income stream

Or: an investor buys a property (possibly off-plan) and aims to sell it at a future date to make a profit off the back of rising house prices.

In this article we’ll consider the second of these: the buy-to-sell strategy.

Buy-to-Sell Investment Strategy

Buying a property to sell is completely different to buy-to-let, aimed more at short-term or mid-term strategies. There’s no worrying about rental income or tenants, you’re just simply looking to sell for as much profit as possible.

The main attraction of buy-to-sell is the amount of money that can be made quickly. You can buy and sell in a matter of months rather than the long-term timeframe that comes with a buy-to-let strategy.

This is also the downside. This type of investment only makes money when you’re working. There’s no passive income, just the money you make on the sale.

The most important things to keep in mind when looking at buy-to-sell are location and budget. You need to ensure that you buy at the right price and keep any refurbishments or maintenance within your budget. Secondly, you need to market your property quickly and effectively. Having a good location for this process is ideal and will help the sale immeasurably.

Choosing buy-to-sell for your investment strategy depends entirely upon your goals. If you’re looking for something short-term and want to generate a lump, it’s perfect. If you’re in for the long-haul, want to build a portfolio or you’re looking for passive income, it’s not for you.

Pros:

A quick process that’s well suited to short-term goals
No tenants or maintenance to deal with
Less dependent on the long-term health of the property market

Cons:

No passive income for the future
Complex management and hands-on work
Can result in a loss if done incorrectly

What about buying off-plan property?

This strategy is not strictly Buy-to-Let or Buy-to-Sell (both are viable), it’s simply a different method of initial purchase. Off-Plan Properties are new-build developments that are not ready for tenants, instead bought by investors before completion.

By buying off-plan properties you can often find excellent individual discounts. Additionally, off-plan properties are often seen as good investments because of the capital growth they can experience between planning and completion.

As an investor, you would buy a property unfinished, wait for completion, research the market and decide whether to rent or sell. This offers flexibility in strategy, although it requires a lot of management and due diligence.

As always, growth isn’t guaranteed. Investing in off-plan property is entirely dependent on the market, particularly if you’re hoping for capital growth during the build period. Be sure to research the area and the market conditions before diving in.

Pros:

Discount on initial purchase

Potential for capital growth during the build period

Flexibility in strategy

Cons:

Advanced strategy that requires management and due diligence

Cash often necessary for deposit

Whatever strategy you choose, it’s vital to ensure that you do your research, ask advice wherever necessary and keep on top of your goals. If you have a solid investment plan, you’re better equipped to make sound decisions and have a better chance of finding success. As ever, don’t hesitate to reach out to the APW team for further discussion.

For current APW buy-to-sell options, click here

A prosperous retirement is a goal that looms in all our minds, and it’s our mission statement to help our clients achieve exactly that. A prosperous retirement is characterised by reliable income streams, healthcare and a lifestyle that allows you to focus on what matters.

But, at the same time, retirement is about more than just money and an investment portfolio.

Money is really a facilitator for something more important: a life that has purpose and is personally satisfying.

So what makes a prosperous retirement worthwhile?

Here are some ideas that others have found to be helpful in finding meaning.

Find your cause

The best expression of a career these days is no longer linear: working in the same line, progressing down a track, reaching an end-point and retiring. In fact, many people now see a life’s work as a logical and coherent collection of projects which support a belief about the world. And this belief about the world is linked to each individual’s unique abilities and talents.

Author Pamela Sim, in her book ‘Body of Work’, describes our careers a life-long work-in-progress. And underpinning that is the idea of a personal mission statement – an expression of what unique abilities an individual has and how they can use them. Invariably, this is the application of personal talents to real-world problems, with the objective of bringing about change.

An excellent way, therefore, to engage with the idea of the personal mission statement is to find a cause to be a part of. Causes range from everything conceivable and conventional: whether it be in the local community or in faraway places.

One individual who has done exactly this in retirement is Bill Morse, who retired in California and resolved to spend his time working in service of a cause he believes important: clearing landmines from agricultural land in Cambodia. Bill and his wife, both securely retired, now work in the most dynamic of ways full for the Landmine Relief Fund near Siem Reap.

Impart your knowledge

Having a lifetime of experience, both professional and personal, means a lot and can really make an impact on those around you.

One wonderful way of putting this into immediate practice is to offer to work with students in a school setting as a classroom assistant. This could be paid or unpaid: if you have a sturdy portfolio, it won’t much matter.

While working with children is not everyone’s thing, there are other ways of imparting knowledge and creating impact. Working as a docent or guide in a museum or gallery can be an extremely interesting way of spending time – especially for those with an interest in the arts. It is usually not remunerated, as galleries and museums see themselves as serving a public good rather than a commercial goal, so it is thought of as unrestricted gift of time on the part of volunteer.

Create, share, sell

One of the most satisfying activities for all of us involves creativity. The act of creation is gives a sense of purpose like few other pursuits. There is a direct link between creativity and overall well-being.

For some people, up-scaling a craft or hobby is a satisfying lifestyle – and, let’s face it, when we work we are usually too exhausted to do anything like this.

But in retirement, you can take it one step further by selling their output via small marketplace websites such as Etsy, or eBay, or promoting it with digital platforms such as Pinterest.

Happiness

The key to happiness in retirement lies in taking action, to capitalising on personal strengths and beliefs, and making an impact. Of course, the blank pages of possibility that characterise a prosperous retirement are really only possible with a solid and well-structured investment portfolio – so it is absolutely essential to plan accordingly.

To make a success of property investment, start by learning all you need to know in our  Investor Education portal.

Buying a property is a daunting and sometimes confusing area, and an issue that is right at the top of the expat buyer’s mind is the question of tax implications. In this article we’re going to review the implications of both tax and stamp duty and how these affect the purchase.

Tax implications

 Essentially, the implications of tax are quite straightforward. Each person in the UK has a personal allowance of £11,500 per year for their income before they have to pay tax to the Inland Revenue. Since mortgage costs can be deducted, this means that you would need to be the landlord of a number of properties before you reach this threshold.

What’s more, this tax allowance rises every year ­- the average rise is £300, which is above the rate of inflation, so you won’t find it encroaches on you over the years. In fact, your annual tax free allowance will increase.

There are ways to mitigate this – married couples or civil partners are able to combine their tax allowances to make a total of £23,000 per year. Non-resident landlords can apply to join the NLRS (non-resident landlord scheme), which ensures that tax is not withheld at source.

For expatriate investors, tax should be declared on the tax return if necessary and returned.

While this is the legal situation with the British tax authorities, naturally your country of residence may also apply its own tax requirements, so that needs to be verified with a tax professional in that country. Some countries, such as Switzerland for example, tax individuals on their worldwide income.

SDLT – Stamp duty land tax

 When you purchase your property, there may be a stamp duty tax to pay. This is a one off payment that varies according to a few factors: the cost of the purchase and whether it’s a first home or a second home.

For first time buyers, the following charges apply:

First £125k is tax free.

£125-250k purchase price is taxed at 2%

£250-925k purchase price is taxed at 5%

For second home owners (or above), which applies to many of our clients, the following charges apply:

£0-125k is taxed at 3%

£125-250k at 5%

£250-925k at 8

Here’s a handy calculator to help you identify exactly the amount you’ll have to pay.

So is it better to own lots of little properties? Or one larger?

Investors sometimes wonder if it is more tax efficient to buy larger properties or smaller ones. Here’s a scenario:

If you buy one large property at £550,000, Stamp Duty is at 8% which results in a bill of £44,000. At a yield of 4% this gives income of GBP22,000 per annum.

If you buy five smaller properties at £100,000, Stamp Duty is at 3%, resulting in a bill of GBP15,000. At a yield of 7% this gives income of £35,000.

Purchasing the five smaller properties therefore reduces your Stamp Duty bill by £29,000 and increases your income by £13,000.

Own as individual or company?

This is one solution that investors sometimes consider – buying through a shell company. While this is totally legal, the effect on your tax burden depends on the situation.

Factors which affect this are the number of properties you acquire, whether you are leveraging on existing properties and your current tax bracket.

An additional point would be the question of domicile: buying via a company would maintain you at ‘arm’s length’ from the UK, and you would potentially avoid domicility issues. This article outlines the pros and cons, and when you should consider ownership via a company.

Still a worthwhile investment

Fortunately, tax matters in the UK are genuinely transparent and easy to understand. In fact, the country’s premium property market is built on solid foundations of good governance, attractive tax demands and transparency, meaning investors have little to worry about in this regard.

Discover property investment opportunities around the UK and elsewhere and our unique payment plans

In our work with expat investors around the world, we encounter many individual situations where property investment works. There is a good number of working professionals using property investment as a tool for future prosperity, and this is particularly valuable in a situation where you fall outside of national pension schemes.

Property makes a great – and affordable – way to build up a source of income for retirement. There is a certain snobbery or cachet about it, but property investment does not have to involve large mansions in glamourous locations. Neither does it have to involve enormous disposable incomes.

Take the following as an example.

Client A and his wife are based in Hong Kong, where they work at an international school. Aged 34 and 37 and from the UK, client A has a 3 year old daughter, and as a family they can save £1,500 per month.

They would like to purchase a property as a “education fund”, but don’t think they have a large enough deposit.

Our work for Client A

Our work is essentially very straightforward. We research the market, according to parameters that have been laid out by discussions had with our clients, and on this occasion we found a new build development in Nottingham that had two bedroom apartments for GBP114,995, giving rental yield at 6%, or GBP7000, alongside a ten year builder’s warranty.

Unlike a traditional property purchase, client A did not have to pay 30% upfront, but they were able to save on a monthly basis, over 24 months. This left them with 24 monthly payments of £1,437, within their budget, with the remaining 70% being covered by a mortgage sourced by us.

The management of the apartment is done by an agency arranged at outset, by ourselves. The agency found the tenants, did credit checks, character references, and collects the rent. This ensures the property is cash flow positive, and the income covers all cost, including the mortgage each month.

The end result

 After two years of saving within their budget, client A had a property that is fully owned, and being paid for by the tenant. At ages 49 and 52, in 15 years time, it will be mortgage free giving a rental yield of GBP9,000 per annum. Their daughter is now 18, and they will be able to use the annual income to pay her education fees.

 Payment Plans

Our payment plans are designed to make investment doable for expats with realistic disposable incomes. Here’s how it works:

• No need for a deposit – fund the property in small monthly payments over 24 months, to give 30%.
• The remaining 70% is paid for by the tenant, and covered by the arranged mortage.
• A Rental gurantee ensures mortgage payments are always covered – its cash flow positive.
• Tenanting, management, upkeep and rental all looked after by selected management companies. We know you don’t have the time to do it when living overseas, so we do it for you.

 The development: Kingsmill – Nottingham;

The Area: From young professionals and students, to families and frequent business travellers, Nottingham has a lot to offer its prosperous rental sector. A charming appeal combined with excellent accessability to the M1 motorway makes it an increasingly popular choice for those wishing to avoid the higher rental costs of its three neighbouring cities.

 The Prospects:

The region is home to some wonderful countryside and expansive green areas. The famous Sherwood Forest is situated 6 miles from the development and the Peak District just 20 miles away.

“Nottingham’s property market is booming at the moment and to be ranked so highly for property price growth is proof of this.” Nottingham Post

“The city is not just within the top three British cities and top five European cities but also within the top 30 global cities – really putting Nottingham on the map as a location to invest and live.” Business Insider

Nottingham recorded annual growth of 10.7% last year, with only London and Bristol beating it in the UK.

 The Development:

The development was a stylish collection of brand new homes, incorporating one and two bed apartments, and two and three bedroom houses.

Financials:

Here, two bed units, start at GBP114,995. You can then fund the 30% deposit over 24 months. That’s 24 payments of GBP1,437 per month. The remaining 70% is covered by way of an arranged mortgage.

This approach is one of ‘fire and forget’. The guranteed rental income covers the mortgage payments. This means you can sit back and watch the tenant pay it off.

Key Facts:

• Yields of 6% or GBP6,900 per annum. Guaranteed on a year to year basis.
• They are sold at a 15% discount versus local comparisons.

• Individual taiored payment plan.
• Guaranteed rental income for 5 years.
• Professionally managed by ‘Complete RPI’. It is totally hands off for you.
• Its central location makes it an excellent choice for commuters to surrounding cities.

Discover property investment opportunities around the UK and elsewhere and our unique payment plans