Ultralets Mobile Logo
Talk to our local team today 01482 562 562   hello@ultralets.co.uk or instant message us here

How do I actually get started investing in property in Hull?

14 Apr 2021

We all know someone that’s made a few quid investing in property right? It’s widely known as one the most stable places to put your money. Not only does it generate a monthly dividend in the profit on your rental income (also known as the yield) but over time the value of the money you initially invested should go up in line with the value of the property (also known as capital appreciation). Of course, this is never guaranteed, and like all investments, your capital is always at risk but you need to weigh up if the risk is worth the reward.

That said, it’s one thing knowing it's worth doing and another thing knowing exactly how to get started. 

At Ultralets we manage, maintain and sell investment property in Hull for clients based all over the world and they all have different motivations for investing. They often have different criteria when investing and ways in which they fund their property purchases.

I thought I would share an example of one of the more common strategies first-time investors use to get things going.

Let’s take this property we sold in April 2021 as an example; 8 Vera Grove, Stirling Street Hull HU3. I can't disclose the exact sale price at the time of writing this but let's assume it sells for the asking price of £62,500.00 for this example.

A popular strategy at the moment is to purchase the property on an interest-only mortgage with a 25% deposit which has the option to repay lump sums of up to 10% of the loan annually. This gives you the flexibility to repay if you’ve had a good year and work some of the loan down, or if you’ve been hit with a few pricey repairs that year or just want to enjoy the profit you have more cash flow to do so.

Let's see how the numbers work:

Overview

Costs

Property purchase price

£62,500.00

Deposit 25 % of mortgage

£15,625.00

Mortgage amount

£46,875.00

Average mortgage arrangement fees to the lender

£1,099.00

The average mortgage rate for a limited company purchase

3.47%

3% Stamp duty payable on completion

£1,875.00

Works costs (Mary vary)

£0

Refurbishment (May vary)

£0

Sourcing fee (based on Ultralets charges and may vary depending on the agent)

£1,200.00

Legal Fees (Approximate cost)

£800

Broker Fees offset (will vary depending on mortgage broker)

£595

Total cost to purchase 

£21,194.00

   

Return on capital invested before costs

26.89%

   

Rent

£475.00PCM

Monthly mortgage (Interest only)

£135.55

Management fee 10%+VAT (Industry-standard but may vary)

£57

Landlord insurance (Average £27p/m)

£27

Monthly cash flow (profit)

£255.45

Return on capital invested

14.46%

Yield

9.12%

 

So in short, on this example property, you would need around £21,000.00 to purchase and that would cover all of your associated buying costs. This would then generate you a profit on a monthly basis of £255.45 (£3065.40 Annually) a 14.46% return on the money you had sat in the bank initially.

Three things to consider that could impact your profit:

Void periods - If the property is empty you’re still paying the mortgage interest and the council tax, this can significantly impact your return and whilst finding a tenant quickly is vital you also need to make sure you get a good tenant who will pay the rent.

Repairs - If you’re hit for a new boiler at approx £1,200.00 that’s straight off your bottom line at the end of the year. Check the higher value repair issues on your viewing - roofs, boilers, windows.

Letting agents - As you can see above involving a letting agent to manage the property takes up a fair percentage of the profit in the deal. Some landlords don’t use agents and aim to save this cost but in reality, a good agent should be more capable of letting your property quicker than you could yourself and retaining your tenant for longer than you can so make sure you do your due diligence before appointing your agent if you choose to do so. Ultimately, despite my obvious bias, I genuinely believe an effective agent will at least cover their own cost in the long run and if they do that and save you a tonne of headaches in the meantime it's money well spent.

You’re going to need to build your team: 

  1. A reliable agent(s) you can lean on for advice 
  2. A good accountant to show you how to set up your business and handle the numbers 
  3. A mortgage broker to find you the best rates based on your circumstances and offer advice on insurance products available
  4. A conveyancer that's speedy at getting your deals over the line.

Ask me about my team.

Do you want a copy of my spreadsheet with all the formulas to work out your next deal? spencer@ultralets.co.uk

Sign up for my investment list and get access to off-market deals in Hull here

Read about other people like you that have done this already here

Posted By

Spencer Wood


Other posts by me

Rated 5 stars on Google
by our customers

Talk to an Ultralets
team member

Or call us on 01482 562 562