This week’s interview with a senior figure from the UK property industry turns the attention to the buy-to-let (BTL) market as we pose the questions to Jerald Solis, business development and acquisitions director for specialists Experience Invest.
Please tell us a little about yourself and Experience Invest.
I’ve enjoyed a career in the real estate sales, marketing, development and investment industry that spans 20 years. I now head the business development and acquisitions departments where I take each and every project from acquisition to concept, design and then launch.
Trading since 2004, Experience Invest is a London-based independent property specialist which offers opportunities to property investors in the UK and overseas, through providing exclusive investments across a variety of asset classes.
The stamp duty surcharge on BTL property has led some to consider "the end of BTL as we know it" - what are your thoughts on its consequences this year?
The additional 3% stamp duty tax on buy-to-let property and second homes will come into play from April 2016. This is a step the government has taken to reduce buy-to-let demand and to give everyday people the chance to become a homeowner.
The increased rate will make it difficult for investors to achieve a higher yield in the short-term. This may initially put some investors off. However, a lot of professional investors and landlords view property as a long-term investment and as a source of a regular, passive income. They may even think of it as an alternative pension. These people will look to recoup the higher initial cash outlay through holding on to their asset.
Investors could still make money developing or re-positioning property, home extensions, loft or basement or converting houses into flats or building purpose-built developments. These options come with a price tag which will leave many landlords with no other option than to pass on some of the cost to renters by putting prices up.
At Experience Invest we have seen a slight rush of sales from clients who wish to invest in buy-to-let property before the new stamp duty rates are introduced.
It is yet to be seen what the higher rates will do to the market however, our team expects changes will have a greater impact on properties at the higher end of the market.
Investors may seek opportunities towards the bottom of the scale to avoid facing a higher tax bill, this may shift attention to alternative opportunities such as student accommodation which is typically available at a lower entry level.
Our team also expects that investors will look for opportunities in the north – where property prices are much lower than London and the south east of England.
Although the higher rate of stamp duty may put some investors off, property will still offer higher returns than many investment options and will remain popular. New changes may be “the end of BTL as we know it” however, money can be and will still be made from the market.
Do you have a 'typical' investor client?
We do not have a typical investor. Many of our clients are from all walks of life and from different countries around the world. Their requirements vary which makes some investments more suitable than others. For example, some of our clients are looking for a retirement income. This type of investor looks for a fully managed opportunity which provides a long-term income stream.
We are also contacted by professionals who are looking for a way to generate a passive income but don’t have quite enough time to research the market and manage their property themselves. This type of client generally has a good knowledge of the market and is looking for a trusted agent to provide them with investment opportunities.
Experience Invest also has a large overseas client base. Overseas investors typically want to diversify their investment portfolio, move money to a secure country, generate passive income or are looking for opportunities with capital growth prospects.
Our dedicated property consultants are able to provide information to suit the needs of our investors. This is why our team is always keen to touch base with new clients to establish their requirements and what they hope to achieve through their property investment.
Are there any common misunderstandings about investment that new clients bring, which you have to dispel?
Looking for the cheapest property with the highest-possible yield and longest-assured return may seem easy, but for many novice investors it can lead to impulsive and bad decisions. A cheap property is cheap for a reason. Other factors, such as the location, the rental demand, the rental amount and the potential for capital growth also need to be considered.
The property must tick all the boxes based on the investors’ criteria, so it is important that they understand exactly what it is they are looking to achieve from their investment.
There is also no such thing as a quick fix and investors need to be prepared to consider a medium-to long-term strategy when investing in property.
Another misconception we face is that buying locally is better. Many people think that the place they live in is the best place to invest because they know the area. If you are looking for a more hands-on investment then this may be the case however, it is sometimes wise to use a property specialist.
Clients who enquire about a property through Experience Invest will receive a tailor-made brochure which will include a financial breakdown, a location overview, market research and more. Research has been conducted on the behalf of the investor so they can learn about other markets which they may have previously ruled out. The properties we offer often perform better in an investment portfolio than the house next door.
What makes new build a great option for investors over other types of property?
Generally, new build properties come with a warranty that covers any defects and damages during the first seven to ten years. This warranty could save investors a lot of money as opposed to an old property.
Some new build developments also offer a discount off the price during the build stage, so there is the benefit of capital gain over construction, and a better rental yield in future. They usually also offer a full turnkey management and letting option for investors. They also can be convenient for investors looking for a split payment plan over construction.
What developments are you currently offering to investors?
We have a selection of exclusive residential buy-to-let apartments and purpose-build student rooms.
Our team takes great pride in only sourcing opportunities in areas which have a strong demand from their respective markets. Our current residential opportunities boast town or city centre locations and our student developments are located just a short walk from main university campuses.
All of our developments provide investors with a rental assurance which is fixed for a pre-determined amount of time.
One Wolstenholme Square is our latest residential opportunity in Liverpool’s city centre. Apartments within this development will generate 8% net per annum and will be assured for the first three years of the investment.
Our latest student development, London Spring Place is located in the heart of Luton and is only a few minutes’ walk from the University of Bedfordshire. En suite and self-contained studios within this development will provide investors a three-year assured income of 8% net per annum.
Experience Invest has a selection of opportunities which have been designed to provide a low entry level way for investors to expand their property portfolio. Each opportunity is fully managed and will generate a passive rental income.
What does new student accommodation offer investors?
UK student accommodation is a progressive asset class which has gone from strength to strength.
In 2015, there was around £5.7bn of investment in the sector – this is more than double what we have seen in previous years.
Year after year we have seen the amount of money pumped into the sector rise which is a clear indication of the increasing popularity of the sector.
Most purpose-built opportunities are fully managed. This attracts people who are looking for an armchair or ‘hands-off’ investment.
Again, this type of new build property comes with a warranty and, as students are required to pay a deposit, any damages can be deducted before their money is returned to them via the relevant deposit protection scheme.
All student property investments available through Experience Invest have been created to attract a wide pool of tenants. Most developments have a selection of on-site facilities such as a gym, games room, meeting and cinema rooms which are free for students to use.
Are there any areas bubbling under to become an investment hotspot?
Yes. Our opportunities in the student property market receive the most amount of interest from investors. Many people wish to find out more about the asset class as a whole.
In recent years we have also witnessed a shift in investor attention towards the north of England. Liverpool, Manchester and Leeds have all emerged as key areas for investment.
What's in your pipeline for later on this year?
Without giving away all of our secrets, we have some very exciting opportunities coming up in 2016.
We have just launched Phase Two of our only student development in the south of England. Phase One of London Spring Place, which is in Luton, was one of our most popular options for investors last year. We are incredibly excited to bring Phase Two to the market and offer our investors some of the highest returns on the market.
The Experience Invest team is also gearing up to launch some incredible developments across the country. Despite the rise in stamp duty taxes which will come into play very soon, the whole team is incredibly confident about our upcoming property investments which will deliver high and assured rental returns.