Risk & Reward – The Fundamentals of Investment

The ability to weigh up risk and reward is a crucial skill for successful investors. Even though investors may be presented with exactly the same information, they may come to completely different conclusions about whether or not it’s a good idea to make the investment. The reason for this is that each investment has to be viewed in the light of an individual’s personal situation and goals and hence an investment which is perfect for one person may be a really bad choice for another. Here are some key questions to ask when deciding whether or not an investment is right for you?

What is my investing horizon? – This is really a better question to ask than the traditional “What is my age?”. You may be a young person who, for whatever reason, can only tie up their money for a short period, or an older person working on the assumption that you may still have decades left to live and even if you don’t, you would like to leave a legacy for your heirs.

How easy would it be to monetise this investment? – Some investments can be monetised fairly quickly and easily, many shares for example, although you do have to accept that you may do so at a loss, particularly if exiting the investment early triggers a penalty and/or a tax liability (such as capital gains tax). Some investments, however, such as property, have much slower transaction times.

How much risk is appropriate for me right now? – In addition to looking at the balance of risk and reward for the particular investment, you need to look at where you stand in general. For example, if the investment is fairly high risk but high reward and all your other investments are very low risk and low reward, then you may feel that you would benefit from taking a bit of a gamble, at least with a small portion of your investment funds, to try to improve your overall return. If, however, you already have a number of high-risk/high-reward investments in your portfolio, then you may be better to stand pat.

How diversified is my portfolio? – Generally, you want to achieve enough diversification so that your portfolio always performs well overall, regardless of the specific economic climate, although some investments may do better than others, depending on market conditions. At the same time, over-diversification can make a portfolio overly complex and challenging to manage.

Does this investment have tax-benefits? – For example, can you put it in an ISA or does it qualify for business relief to help with your estate planning? Tax benefits in and of themselves are unlikely to turn an inappropriate investment into an appropriate one (or vice versa), but when you have the choice between two appropriate investments, remember to take tax into account when calculating which one could offer the better returns.

What is my field of knowledge? – You need to be able to understand potential investments to be able to judge if they are right for you, since, ultimately, control of your financial destiny lies with you and you alone. At the same time, however, the best decision-makers generally know when to get advice, choose their advisers carefully and pay close attention to what they say. With this in mind, it can be worth giving strong consideration to getting professional help from a financial adviser, who can look at your specific situation, make suggestions as to what investments could be right for you personally and explain to you what they mean in actual, practical terms, thus empowering you to make the right decisions for your particular circumstances.

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Business & The General Election

Business owners were probably as surprised as everyone else when Theresa May called a general election three years ahead of schedule. With such a short timetable, there’s a relatively short window of opportunity for businesses to set out their “wish list” for what they would like from an incoming government. It is, however, possible to speculate what the general election may mean for businesses large and small and, of course, the self-employed.

The Right to Remain Question

This is arguably the pre-Brexit question in that it is a matter which the EU has stated must be settled before Brexit negotiations proper can proceed. In very simple terms, assuming the EU means what it says, giving permanent right to remain to EU citizens who have been resident in the UK for five years or more is a necessary condition for any further negotiations to take place. Given that this only impacts a relatively small number of people (albeit to a great degree), and would presumably be reciprocal (in that the EU would grant the same rights to UK nationals resident abroad), this is likely to be a fairly easy agreement to make and would give the people concerned (and their employers and employees) reassurance about their future.

The Brexit Question

There can be little doubt that the result of this election will have a significant impact on the course of Brexit. If pollsters are correct and Theresa May returns to power with an increased majority, then it could be a strong sign that Brexit could be as soft as the city would like. May herself was a Remainer, but up until now she has had to deal with the reality of a small majority and some hardline Brexit-supporting backbenchers. If local party branches are encouraged to field pro-European candidates and enough of them are elected, then Theresa May could find her hand substantially strengthened in navigating her way through the Brexit negotiations which are sure to define this parliament and her leadership.

The Currency Question

The Pound Sterling has been on something of a wild ride over recent times. While it’s a fact of life that some businesses benefit from a weak pound just as some businesses benefit from a strong pound, pretty much all businesses benefit from at least a reasonable degree of stability so that they and their customers can plan ahead to a reasonable degree. If the general election achieves nothing more than to bring stability to the Pound, then it’s probably fair to assume that most businesses will could that as a positive, even if they would have preferred the Pound to be stronger or weaker.

The National Insurance Question

In all the sound bites and fury about Brexit, it’s easy to forget the NI debacle in which Philip Hammond’s (widely-anticipated) readjustment of the NI system to make it “fairer”, was swiftly reversed after a (presumably unanticipated) backlash. Unsurprisingly, questions about what was in store for NI in the next parliament were high on the agenda for political journalists. It was widely noticed that Theresa May failed to rule out raising NI if she were to win the election. In fairness, there’s a difference between refusing to rule out something and saying that you will do it, but it also has to be remembered that the stated reason why the increase was reversed was because it was against the spirit of the manifesto commitment, rather than because the government thought it was a bad idea in and of itself. May also refused to rule out raising income tax or capital gains tax. She did, however, commit to keeping the maximum VAT rate at 20%.

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Will The General Election Bring Joy To Buy To Let?

From a political perspective, UK-based buy-to-let landlords have had little celebrate over recent times. New affordability criteria for (re)mortgaging, the controversial “right-to-rent” scheme, and the tax “triple whammy” have hardly left buy-to-let-investors in the UK filled with good cheer. Nevertheless, the buy-to-let market continues to hold strong, there’s a very simple reason for this. In the UK there is a chronic shortage of housing in general, coupled with a significant percentage of people for whom renting is clearly the best choice for their life stage. The fact that international investors are making the most of the weak pound to buy up UK-based assets is merely a reflection of this, rather than a key driving force for behind the strength of the market. Now we have a forthcoming General Election, could this provide a welcome boost to buy to let? Answering this question requires looking at three others.

What is the impact of having an election?

Elections, fundamentally, are a choice between the status quo (the current government or their direct successors) and change and any time there is the potential for change there is an element of uncertainty. This means that the period just before an election can, in many ways, be the equivalent of a person holding their breath while they wait to see what is going to happen, hopefully followed by a sigh of relief. It’s also worth noting that even when an election result is as widely expected, it can take a little while for people to absorb the fact and decide what, if anything, they need or want to do about it. In the short term, that may mean that the buy-to-let market is “on hold” in many respects, until everyone concerned has a clearer idea where they stand.

Who will win the election?

People may feel cynical about opinion polls these days, but it’s a hard fact that Theresa May had to ask parliament’s permission to call an election about three years earlier than scheduled and therefore it’s a reasonable assumption that she thinks she can win it, or, perhaps it would be better to say, she thinks her opponents can’t. For their part, her opponents, theoretically, have a lot to gain, in that they have at least some sort of chance of taking power, and very little to lose in that the election will only extend the Conservatives’ mandated by another two years, assuming they win. A quick scan of newspaper headlines reveals that this seems to be a widespread assumption even former Labour leader Tony Blair saying that he expected Theresa May to win it.

What is the Conservatives’ attitude to buy-to-let?

If we assume that the Conservatives win the election, then it also seems reasonable to assume that, at least in the beginning, they will carry on along much the same path as they have been on so far. This includes a promise to “fix the broken housing market”. That’s a pretty broad statement, but the last couple of budgets give an indication of what the Conservatives currently see as their preferred approach. There has been money to build more new homes and higher taxation on buy to let. At current time, the government is also discussing a ban on letting agents’ fees to tenants. In short, the government seems to be trying to make it more of a buyers’/renters’ market. The problem is that the main reason housing in the UK has long been a sellers’/landlords’ market is because of the lack of supply and this is highly unlikely to change overnight or even in the next five years. What may well disappear are “amateur” landlords, possibly to be replaced by “buy-to-let” housing funds, which would allow people to invest in the buy-to-let market without actually becoming direct landlords. This would allow for a consolidation and, indeed, professionalisation of the market and perhaps create a more effective industry force to allow landlords to get their point of view across to decision makers. So, in short, although the election may cause some short-term pain in the buy-to-let market, it has the potential to bring a lot of longer-term benefits.

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Why Brexit Might Not Be That Bad

It’s official (almost), the wheels have been set in motion to trigger Article 50 and start the process of taking the UK out of the EU. Understandably, there has been a great deal of media coverage about what this will all mean and while, on the one hand, the future is anybody’s guess, on the other, when trying to determine what will happen, it’s often helpful to look at the fundamentals.

Fundamental 1 – London is a property market apart

London is home to the city, which has been quite open about its concerns regarding leaving the EU. Other European cities have also been quite open about their desire to lure businesses away from their London bases. There are, however, a number of reason to refrain from panicking about a property crash in London, for example:

1 – While it would probably be painful for the city to lose access to the European market, it has global reach so it is highly doubtful that the blow would be terminal.

2 – Even though London and the city are often spoken of as though they were one and the same, in actual fact there is far more to London than the city. The creative industries are one obvious example of this, as is the fact that many digital technology and other “disruptive” companies, have chosen to make London their base. These cover a broad scale from industry giants such as Apple, to niche start-ups. In principle, these companies could be lured away by other cities with equivalent infrastructure and continued access to the single market, however in practice there are a number of reasons why they should stay put.

3 – The UK has a very flexible labour market including a thriving freelance economy, which is great news for companies who need to get work completed but want to avoid the commitment of taking on employees (at least until they have a clearer idea of where they stand). It also tends to be at least relatively accommodating of disruptive business models. Paris, by contrast, has been locked in a battle with tech giant Amazon, which is unlikely to have passed unnoticed by any technology companies who may have been approached about moving there.

Fundamental 2 – The UK is an attractive export market for other countries

While some pundits have speculated that certain EU members may be prepared to sacrifice their own export potential in order to make an example of the UK and deter other countries from leaving the bloc, it’s a wide open question as to whether this would be a feasible ploy in real-world conditions. In simple terms, such an approach carries the risk of causing job losses and this may go down badly with the (voting) public. Even if such a scenario did occur, it is highly likely that other countries would look to fill the gap, which would create reciprocal export opportunities for the UK. This is important for the post-Brexit outlook of regional economies which are based on agriculture and/or manufacturing.

Fundamental 3 – Long-term value will always attract investors

While the weakening of the pound makes it more expensive to import raw materials, it also means that anything priced in sterling becomes more affordable in real terms to international buyers. This includes finished goods (for export), shares in UK-based companies and, of course, property. The fall in the value of sterling could, therefore, help to provide a short-term boost to the UK economy during and after the Brexit process. Over the long term, it is a reasonable expectation that as the UK economy stabilises, the value of sterling will rise again until it is, eventually, back to its pre-Brexit levels.

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It’s Not Grim Up North

Data from peer-to-peer lender Kuflink shows that rental yields in the North of England and Scotland have been comfortably beating rental yields in London at 4.3% and 3.2% respectively. While this is, of course, interesting news for (potential) buy-to-let investors, it’s still useful market intelligence for those who prefer to avoid the politics of buy-to-let and invest in the property market through other channels, for example property development.

Takeaway point 1 – There’s a difference between price and value

London and the South East is an expensive place and hence landlords are likely to be able to charge higher rents than they would for equivalent properties in other parts of the country. The flip side of this, however, is that buying the rental property is likely to have cost them more than an equivalent property in another part of the country. There are still plenty of reasons why the Thames Valley area could be a good place to invest in property in some way, but it’s worth remembering that there is strong demand for property in other parts of the UK as well and hence opportunities for investors.

Takeaway point 2 – It’s always worth looking out for up-and-coming areas

According to Kuflink, Manchester and Salford provided rental yields of 6.7% and 6.6% respectively whereas Cambridge was a mere 2.7%. The data did not analyse why this was so, but one very feasible explanation is that Manchester and its neighbour Salford have both been in a process of regeneration over recent years, with the BBC making news itself by moving some of its production to Salford back in 2012. The availability of work attracts people to an area, particularly young adults, for whom renting is likely to be the most appropriate option, even if they have the funds to buy. The combination of relatively low house prices (compared to London) and increased demand for rental properties makes for good rental yield. It also offers good opportunities for other forms of property investment since many of the people who arrive as renters will ultimately settle down and buy property in the area. Cambridge, by contrast, is a mature market. As a University town, it has a pretty much guaranteed market for rental properties and as a research centre it also has a demand for property to buy, but there is nothing new about any of this and so the opportunity to invest at the start of an upward trend is really long gone. The North of England and Scotland have both been benefitting from improved infrastructure (particularly transport links and broadband internet) and as they are outside the “city” zone, they have less reason to be concerned about the prospect of some financial service roles being moved out of the UK due to Brexit.

Takeaway point 3 – Quality matters

The fact that in the UK there is always a strong demand for housing is hardly a secret and a quick scan of a newspaper website will probably reveal plenty of articles about landlords and home builders taking advantage of desperate renters or buyers. While there is certainly an element of truth in this, the simple fact is that the fundamentals of business also apply to the property market, even though it generally moves at a slower pace. Companies (or individuals) who supply shoddy goods and/or poor customer service may make a quick short-term profit, but over the long term they tend to get found out and weeded out. Because of this, anyone looking to make meaningful, long-term returns from property, whether that’s as a landlord or as an investor in property development, is well advised to be very selective about their purchases and only put money into high-quality builds.

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5 Ways to Invest £50,000

It’s been a long time since savings offered any sort of meaningful return, which means that those who wish to grow their cash need to look at alternatives. With that in mind, here’s a look at where you could put a £50K investment.

The Stock Market

The stock market is a big place and the companies in it perform very differently, which is understandable given that the term “the stock market” includes everything from high-tech start ups to established blue-chip companies with little in the way of growth in their share prices but great dividends. This is why there is generally at least one stock-market investment to suit anyone of any age, appetite for risk or preference for capital growth versus income yield. The stock market can provide good returns, investors just have to place their money with care and accept the fact that both individual companies and the market in general can go down as well as up.

The Property Market

The property market has long been popular with investors seeking good returns on their money with minimal risk. There are some places where £50K could buy you a feasible buy-to-let property although you might need to budget a little extra on top for sales costs, e.g. surveys, but realistically in most parts of the country and for most properties, £50K is a deposit, albeit a very substantial one in some locations. On the other hand, buy to let has become something of a contentious topic over recent years and landlords have become an easy target for government revenue collecting, with changes to stamp duty and mortgage tax relief both benefiting the exchequer at the expense of landlords. Little wonder, then, that even though BTL remains popular, some investors are looking at alternative options.

For example that same £50K could be invested in a property development thereby benefiting from property without the hassle of managing tenants and properties within the law. Obviously this is an area in which we may seem to be biased but the ROI specks for itself and with a UK investment you can literally see your investment developing..

Invest in Companies Which Qualify for Business Property Relief

This is an option which may have particular appeal to older investors, since these investments are excluded from inheritance tax calculations after two years of ownership, whereas gifts need to be given at least 7 years prior to the individual’s death to qualify for full IHT exemption. In addition to this, the holder can continue to benefit from their interest in the company up to the point of their death, whereas they must give up any and all beneficial interest in any gift they give for it to be exempt from IHT. At the same time, however, it is usually best if the investment in question actually makes sense as an investment rather than simply, or even, primarily being a means to reduce IHT liability.

Given that companies which qualify for BPR are, by definition, small and are particularly likely to be family-run firms or start-ups, finding the right vehicle for your money can be complex. You also have to remember that as firms grow, they can stop qualifying for BPR although in this case, you may seal in a profit by selling your investment (or indeed choose to hold on to it anyway).

The State Pension Top Up Scheme

If you have already reached state pension age, you have until 5th April 2017 to make a lump-sum contribution to get as much state pension as you possibly can for the rest of your life. How much this will costs depends on various factors, particularly your age and the amount of extra pension you want to receive. The clock is now ticking on this one, so you’ll need to make a quick decision as to whether this option is for you.

As with all investments it’s best to seek financial advice and always bear in mind the caveat that investments can go down as well as up!

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New Home Manifesto – What Does It Mean?

Annual budgets serve many purposes, one of which being to show that governments are making good on election (or other commitments). Affordable housing (or the lack thereof) has long been a political hot potato in the UK and therefore it was only to be expected that the government would take some form of action to address this in the budget.

The promises in brief

There were two key points which directly relate to housing throughout the UK. The first was the promise of a £2.5bn housing infrastructure fund, which should lead to the building of 100,000 new homes in areas of high demand. The second was the promise of £1.4bn which was specifically for the provision of 40,000 affordable homes. With regards to this second point, it’s worth noting that this pledge actually goes even further than simply providing the funds. The government has relaxed the rules around bidding for the funds, meaning that companies have more options open to them than previously. In addition to this, there was a £3.15bn funding pot provided to London for the provision of affordable homes.

The budget also contained a number of promises relating to infrastructure, which could feasibly have an impact on the property market, for example increasing transport options may make it viable for people to travel to work from places they would otherwise have been forced to overlook and similarly rolling out superfast broadband may increase the options for home/remote working, which again could have a knock-on effect on the property market.

A stick for buy-to-let, a carrot for new homes

In 2015 the government delivered two sucker punches to BTL landlords. It made changes to stamp duty so that those owning more than one property paid an increased fee and it reduced the amount of mortgage tax relief which landlords could claim. The 2016 statement left BTL landlords alone, although plans were announced to clamp down on fees charged to tenants by letting agencies, but contained the announcement that the government would be supporting house building in general and the provision of affordable homes in particular.

However with new taxes and stricter lending controls coming into force in a few months the buy to let market is not looking as promising as it once did.

The outlook for 2017 and beyond

At the moment it’s rather hard to say what effect all these changes will have in practice. First of all, the autumn statement was only a few months ago and happened right before the Christmas period which has its own set of rules (some economic sectors being frantically busy, while other go into seasonal limbo). Secondly some of the changes are yet to be enacted and in some cases, it’s unclear at what point they will be implemented. For example Philip Hammond’s promise to put the brakes on agency fees is to be implemented “as soon as possible”. Thirdly, and possibly most importantly, there is very little clarity on how these pledges are going to be implemented in practice. For example, the government has relaxed rules around bidding for funds to develop affordable housing so that, in principle, bidders could develop homes for affordable rent instead of having to offer some sort of ownership option, be it shared ownership or rent to buy. These new rules, however, have yet to be tested. In other words, at this point it’s entirely unknown whether or not bidders will consider it worth their while developing property intended purely for rent or whether their applications will be accepted if they do. It’s also unclear where the priority will be in the “high demand areas”. London would be an obvious example of a place where housing is desperately needed, but it has already been designated its own pot of affordable housing funds. Presumably the answer to these questions will be revealed in time, but the government acknowledging the importance of home building in the UK is, at least, a positive sign.

https://www.theguardian.com/housing-network/2016/nov/23/autumn-statement-2016-social-housing
http://www.homesandproperty.co.uk/property-news/autumn-statement-2016-five-ways-it-will-affect-the-property-market-a106501.html
http://www.bbc.co.uk/news/uk-politics-38075649

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Is It Time To Give The Markets A Break And Change Your Portfolio?

Over recent times, market-watching has been an educational activity for those with a strong stomach. World affairs (Brexit, the U.S. election…) have sent them plunging down only to start working their way back up again. With that in mind, here are 5 alternative investment options for those looking to give their portfolio a new year refresh, listed from the most sensible to those which are really more about having a bit of fun.

Property

Property is generally a stable investment in every sense of the phrase. This is particularly true in countries such as the UK where there is not only a high population density and an acknowledge lack of housing in general, but also a need to replace existing low-grade and/or dated housing with housing which is suitable for modern requirements. There are various ways to invest in the property market, of which buy-to-let is probably the most visible, but alternatives such as investing in property development can give your portfolio the benefit of exposure to the housing market without taxes, landlord involvement or a property to sell should you want a shorter term investment.

Peer-to-Peer Lending

Banks essentially take deposits from savers and lend them to borrowers taking a percentage for themselves along the way. Thanks to technology, peer-to-peer lending allows individuals to cut out the middle-man (or at least change their nature) so that lenders and borrowers can both get better rates. Of course, if you put money in a bank then, in principle it should be absolutely safe (although only deposits of up to £75K per bank benefit from an FSCS guarantee), whereas, as a lender, you accept the risk of default. Having said that, the role of the P2P platform is to screen borrowers and assign them risk categories, so lenders can make informed decisions.

Crowdfunding

Probably the most famous crowdfunding site of them all, at the moment, is Kickstarter, but this is unlikely to be of any great interest to investors since at this time Kickstarter explicitly forbids funders being given shares with financial value, instead they are given gifts to show appreciation. There are, however, other sites which do allow investors to receive shares. The key point to remember with this type of investment is that it tends to be high-risk/high-reward. These companies often have a serious risk of failure, in which case, there is a strong chance you will lose your money. If they succeed, however, you could be hugely rewarded.

Gold and silver coins

This is a hybrid of investing in collectables and investing in precious metals. Investing in collectables can be both fun and profitable, especially if you’re collecting something which really interests you. Precious metals have an obvious, long-term appeal. If you go for collectable coins in silver and gold then you will have the physical quantity of the precious metal, plus the chance that the coin itself will acquire collectable value or that its collectable value will increase.

Premium Bonds

If interest rates were higher, premium bonds would be a horrendous place to park your money, but at current time, savings accounts and ISAs are offering pitiful returns and current accounts are places to hold your money for easy access rather than to grow it. So even though premium bonds have the same disadvantages they have always had, namely they pay zero interest and your chances of winning anything at all, let alone any significant amount of money, put them into the category of having a flutter rather than serious savings or investment, today’s low-interest-rate environment makes these points much less significant than they used to be. So if you need somewhere to park your cash over the short term they could be a reasonable option and, you never know, somebody has to win.

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What is Sustainable Housing?

Sustainability has become a huge topic over recent years and has started to impact many areas of our lives, from the food we eat to the transport we use and the homes in which we live. While the word “sustainability” may have passed into common usage, it’s worth taking a little time out to try to grasp what it means with regards to property in general and housing in particular. In general terms, the concept of sustainability refers to housing which is in harmony with its environment and ideally should have either zero environmental impact or, if at all possible, a beneficial environmental impact.

Sustainability starts with construction

One of the reasons why it’s important to replace existing “low grade” housing with a modern equivalent is that the concept of sustainability starts with the construction of the house. As time has gone by, not only have home builders gained a better idea of how to build in a sustainable manner, but they have also started to integrate more sustainable features into the fabric of the house, for example, in the UK’s climate, buildings which are created with insulating qualities are inherently more sustainable than those without.

Sustainability is closely linked to suitability for the local environment

While the basic concept of sustainability is universal and many of its general principles (such as minimising carbon emissions) also hold throughout the world, translating these principles into practice means taking into account the practical realities of any given local environment. For example, cities with high population densities, such as London and New York have been experimenting with enhancing sustainability through the use of higher-density housing, which is often closely linked with developments in technology. In simple terms, reducing the amount of housing space per head reduces the amount of materials and labour required to create it and therefore the environmental impact of its construction, plus it effectively makes for a more efficient use of resources. For example it takes the same amount of energy to heat an entire building regardless of whether it is used by 1 person, 10 people or 100 people. This approach has been yielding very positive results in the cities where it has been tried but is clearly useless in a rural environment, where dwellings can be literally miles apart from each other. In these cases, sustainability may relate more to making such dwellings “passive” in the sense that any resources they use either come from renewable sources (such as solar panels) or are replaced in some way, such as by planting trees for those cut down for wood.

Sustainable housing is dependent on sustainable infrastructure

Housing is, of course, a place for people to live and these days it’s also increasingly used as a place to work as well. Humans do not, however, spend all their lives in their homes. They need to go out to grow food or buy it, meet people, go to work, use services and do all kinds of other things. This means that developing sustainable housing needs the support of sustainable infrastructure. Again, what this means in practice depends on the local environment. In the city, where distances are relatively short, it may mean encouraging “zero-carbon” modes of transport such as cycling, by making them safe in every sense of the phrase and also providing effective public-transport for those for whom activities such as cycling are impractical (e.g. those with disabilities). In the countryside, however, the population spread can make it extremely challenging to develop a meaningful public transport network, so again sustainability returns to the concept of using renewable resources and/or replacing any resources used. In terms of transport this could mean making the switch to electric cars powered by solar energy as opposed to petrol ones.

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Investing in Students

While classic comedies like The Young Ones and Rising Damp portrayed students as people who lived in the grottiest accommodation and had living standards to match, the truth is that even then the student world was far more mixed. Today, the ever-increasing number of students going to university obviously creates strong demand in the rental market and there is a need for different grades of property to satisfy different budgets.

The Council Tax Issue

One key point, which sets “student property” apart from the general “young adult” market is that fact that, under current rules, students are exempt from paying council tax. If however, students share a home with working adults, then the household become liable for council tax. For this reason, students can prefer to stick to living with other students. At current time, this feature of the tax landscape seems set to stay in place for the foreseeable future. 

Investing in Student Accommodation Route 1 – Buy to Let

University towns are popular locations for buy-to-let landlords. On the one hand, the reason for this is obvious, lots of students means a ready market for rental property. On the other hand, it also means that there can a lot of competition from other investors. This can push up prices to the extent that rental yield may be significantly lower than would otherwise be expected. If a suitable property can be found, the next step is to fill it. Assuming the property is intended for more than one person, you basically have to choose between letting it out as a complete unit or running it as a share-house/HMO. There is definitely a market for letting out complete properties students, which can share with their friends and this would, in principle, give you the option of making the residents jointly and severally responsible for the rent and any damage to the property. These properties can, however, be harder to fill than standard share houses, particularly since some students (and their parents) may have issues with their potential liability if another party acts irresponsibly. The line between share houses and HMOs is generally decided by the local council, which may impose its own rules on the latter. Landlords may also find that in practical terms they need to be accredited by a recognised scheme before they can target the affluent end of the market, although professional landlords are unlikely to find this a difficult task.

Investing in Student Accommodation Route 2 – Property Development

Those who remember student residences as being places with questionable heating and plumbing will find the current generation of student property developments a far cry from the student halls of their youth. Whereas once halls of residence were built and maintained by universities purely and simply so their students had somewhere to sleep (other than in lecture halls), the current generation of student accommodation is often developed with or by private companies and managed to a very different set of standards. The availability of quality accommodation intended purely for use by students (i.e. protected from competition from working adults and without any issues related to council tax) can be the deciding factor in picking one university over another. Depending on their location, such properties can either be intended for year-round use by students (who may want or need to work during the summer) or do double-duty as short-term lets over the holiday periods, particularly the summer. They are generally the preferred option for first year students new to the area and the university and now many students like to remain in them for continuity and convenience even when they are acclimatised and have made friends.

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