Investment planning, Mortgages

London Property Investment Advice – Buy, Rent or Renovate?

17 June 2024

As a leading financial advisory firm in London, one of the most common questions we get from clients at Morrinson Wealth is around property investments. With home prices in the city at perennial premium levels, deciding whether to buy, rent out, or renovate property requires careful consideration.

From tax implications to expected returns and more, there are numerous factors that come into play when evaluating London property investment opportunities. Here is some advice based on decades of experience helping clients navigate this asset class successfully.

Buy: Get a Foothold in the Appreciating London Market

For long-term investors able to take a buy-and-hold approach, purchasing investment properties in London can be a great way to build wealth gradually. While the heavy upfront capital required deters some, the potential for price appreciation, rental income, and a valuable portfolio asset can make buying smart from a wealth perspective.

The UK tax policy also incentivises buy-to-let property investments through tax deductions landlords can take on mortgage interest, maintenance costs, agency fees, and more. Setting up a company to hold rental properties can further increase tax efficiency.

Of course, projected cash flows and rate of return calculations should drive buy decisions more than speculative home price assumptions. But for investors with the proper time horizon and risk tolerance, purchasing London property can be a lucrative strategy.

Rent Out: Generate Income from Your Home

If you already own property and find yourself house-rich but cash-poor, considering renting out your home on a short-term or long-term basis could be worthwhile. Many London residents effectively earn “rent” on their homes to supplement cash flow.

Short-term/holiday rentals via platforms like Airbnb, VRBO, etc. allow for higher daily income when your property is rented. This is ideal if you travel frequently yourself or only need the income during certain periods. Just be aware you’ll need to pay tax on this rental income.

Long-term rentals generate lower but steadier monthly cash flow in exchange for less work. With strategic tax planning around your rental income and expenses, this can be a great way for London properties to help fund retirement or other financial goals.

However you decide to rent out space, be sure to run detailed numbers factoring in costs like agency fees, maintenance, taxes, etc. Cash flow projections and a cap rate analysis can reveal if renting pencils out favorably.

Renovate: Unlock Equity and Investment Value

For both home-owners and property investors in London, strategic renovations can immediately build equity while also ensuring your space meets current market demands. Done right, renovations improve both the utility and value of your real estate assets.

At Morrinson Wealth, we often advise considering renovations in conjunction with remortgaging efforts. Leveraging your increased home equity via remortgaging can free up capital to fund other investment opportunities while still benefiting from your renovated property’s higher market value.

As always, crunch the numbers ahead of time to ensure your projected renovation ROI justifies the time, effort and cash required. In London’s booming property market, smart renovations are often a savvy investment.

Tailor London Property Investments to Your Goals

The optimal way to invest in London property depends greatly on your specific financial goals, net worth, and overall investor profile. No two situations are the same.

Reach out to the Morrinson Wealth Mortgage & Protection team today to discuss how our property investment advisory services can help you capitalise on London’s dynamic real estate market. We’ll provide the customised, objective advice you need to invest confidently.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

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