We’ve often been asked by Guests for our tips on finding that perfect second home in London – one that will have a great return on their investment as a successful vacation rental. Finding just the right apartment with an ideal location in central London near transportation and London landmarks, historic charm and an excellent setting is not an easy task. Those perfect London apartments are out there, and with a bit a searching and some good tips you’ll be on your way. We’re delighted to have Suzanne Millar, an experienced relocation agent and property buyer in London, here to answer some questions and to share her insight into the property market in London. If you’re considering buying an apartment in London for a second home or vacation rental, we hope Suzanne’s advice will help you find the perfect place!
I’d really like to have a second home in London but will only need it for a few weeks a year – do you have any tips for making the investment really pay for itself?
Yes, you can rent the property out for short lets which will give you a lot of flexibility. London Perfect would be the ideal short let agent for you as they are a small, professional and well run company who find suitable tenants and can manage your property. They specialize in high end properties, i.e., those in great condition and done to a high specification and they make sure their tenants are happy as well as their landlords. London Perfect organize everything from “check ins” and “check outs”, cleaning the property, collecting the rent, repairs and maintenance, etc, so you can leave the worries to them and enjoy your property when you are in London!
So what should I look for when considering an apartment to rent out for part of the year?
First and foremost: location! You would want a property in a prime location that is central and safe as well as a reasonable distance to public transport. Even if you don’t think you would use public transport, many tenants would and also, this is something that when you eventually sell your property, prospective buyers would look at. The quality of the specification is important—the better the quality, the better the rent you achieve and the longer things last. There should be a good ratio of bathrooms to bedrooms, i.e., a four bedroom property with one bathroom would be a bad idea. Generally, a master bedroom with en-suite bathroom is ideal and then a maximum of 2 or 3 bedrooms to each extra bathroom. Good storage is desirable so that there is enough storage space to lock away your personal items while the property is being rented yet leave the tenant with some storage as well.
What have been the best neighborhoods to purchase vacation rentals in London?
The best neighborhoods have been the most central ones such as Kensington, South Kensington, Chelsea, Knightsbridge and Marylebone. These areas are very popular as they are safe, have great transport and shopping and are very attractive.
What kind of properties do you recommend?
I always recommend the best quality property available for a particular budget and, even though there are always compromises to be made, do not compromise on buying a property because it is “good value” due to a major flaw such as a very busy road, over a pub, poor outlook, lack of natural light, or miles from public transport, etc.
What about buying freehold versus leasehold?
Most houses in London are now freehold and I would only buy a freehold house. Many flats have become share of freehold which is the most desirable, but a long lease is nearly as desirable. Share of the freehold gives the owners more say in how the building is run, however, it is run by a committee and it isn’t always easy to get everyone to agree. In any case, the buildings are nearly always managed by a professional managing agent.
What are the costs involved in buying a property?
In the UK, unlike many other countries, the seller pays the estate agent’s fee which usually ranges from 2 – 3% of the agreed sales price. The buyer has to pay for a surveyor, solicitor, stamp duty land tax (a one-off buying tax) and the buying agent’s fee (if they use a buying agent).
How much is the stamp duty land tax?
Here’s an outline of the Stamp Duty Land Tax:
|Transfers of property are subject to stamp duty land tax at the following rates:|
|Value up to £125,000*||
|Over £125,000* to £250,000||
|Over £250,000 to £500,000||
|Over £500,000 – £1,000,000 **||
|Over £1,000,000 ** – £2,000,000 **||
|* £150,000 for non-residential property and residential property in disadvantaged areas. Special rules apply for new zero-carbon homes.** Residential property only. A 15% rate will apply to properties over £2,000,000 purchased by certain “non-natural persons”.|
What can I expect to pay for one bedroom/2 bedroom etc?
Prices are based on size, quality and location rather than how many bedrooms.
What should my budget be if I want to buy a nice one bedroom apartment?
The best thing to do would be to start with a budget, such as £750,000 and look at a few properties. You can then adjust your budget up or down, depending on what you see. It is difficult to fix a budget for a particular type of property from the onset unless you know the market well. Most people change their budgets once going out to see what they can get. People not used to thinking in terms of square feet or square metres quickly learn what size is right for them.
What type of properties should I avoid?
I would avoid basements (unless they are exceptional and have a garden) as they are much harder to sell, walk ups higher than 2nd floor and properties on a very busy road. I would also avoid properties that are more than a 10 minute walk to a good underground station and ones in a neglected building.
Any other tips for what to watch out for when buying a vacation rental in London?
It is always important to have a survey done and hire a good solicitor to check on any planned works on the building and in the close vicinity. The surveyor should examine the roof and rest of the building in the case of buying a flat as there could be major works due (such as dry rot or a new roof) and the owner of each flat has to pay a proportionate rate. You don’t want to buy a flat and be suddenly hit for £25,000 or more worth of building repairs!
Suzanne Millar has 16 years’ experience in the property market as both a relocation agent, helping corporate tenants with long-term rentals, and a property buyer. Before working in the property market she was a consultant in several different human resources areas such as executive recruitment, employee benefits and actuarial consulting. Her former employers include KPMG, Towers Watson, Armstrong International and Karen Deane Relocations. She has a BA in Economics and Art History from Duke University and an MBA from Wharton. Suzanne is American and has lived in London since 1987 and is married with two children currently at university in the UK.