Although geographically a small area, Prime Central London is a series of micro-markets. This is due to the many different areas that make it a cosmopolitan whole and its diverse architecture, from purpose built studio flats to huge detached mansions.

The rental market in Prime Central London tends to be made up of corporate tenants, located to London through their jobs. They are likely to be single or professional couples looking for one or two bedroomed flats or small terraced houses and mews properties.

Since 9/11, rental budgets provided by their employers accurately reflect what can be obtained within the market, with little room for discretionary or luxury expenditure. This cycle has been repeated during the current credit crisis. As a result, the most robust sector of Prime Central London in recent years, both in terms of sales and rental has been the smaller flats rather than high-end value properties, which appeal to a much smaller niche market.

The minimum entry budget including purchase price, related fees, any refurbishment costs and furnishing for rental occupation will be around £500,000. This will get you a one bedroomed flat in Prime Central London.

For a two bedroomed, two bathroom flat, the entry budget will be between £650,000 and £1,000,000. Of course, within this you can gear-up, meaning that your equity contribution can be significantly lower.

As a rule of thumb, furnishing, Stamp Duty and fees will cost around 10% of the capital investment and there will be a further 10% to spend if a property needs full refurbishment from top to toe. This will be assessed on a case-by-case basis. Property prices in Prime Central London are based on square foot values, so be prepared for what your budget can afford.

Prime Central London is the business, social and cultural centre of the UK. Good properties are scarce. There are essential factors to consider when selecting a property that will appeal to the corporate lettings market and stand you in good stead when selling.

• Proximity to transport links with particular emphasis on access to the City and Canary Wharf and to amenities such as good restaurants, bars and clubs.
• A practical layout is more important than overall square footage. Space nowadays tends to be more important than the number of rooms.
• Look for properties that have “an edge” such as outside space. Consider the neighbourhood, the building, service charges, common parts and outlook.
• Avoid buying into new developments unless it is exceptional. The inevitable premium paid for “newness” will disappear. The flat will have to compete with other similar investment units resulting in less potential for capital growth and rental yields.

This is a mature, highly professional market best suited to a professional investor. Poorly presented properties can sit unoccupied on the market. Not only does good presentation maximise rent for a property, it helps minimise voids.

• Good tenants demand immaculate presentation and will pay a premium for it.
• Refurbishment is best done in one go, at the outset of the investment. This will minimise costs and disturbance to tenancies down the line.
• Sell the lifestyle with a property by “dressing it” for viewing. Finishing touches are all important.
• Be realistic about potential rent. The market calls the shots.

Smart investment provides long-term capital appreciation and immediate, consistent rental yields but you need to have all the facts at your disposal.

• Establishment costs can be significant, with stamp duty, legal and surveying fees to consider.
• Coupled with refurbishment and furnishing costs, initial equity contribution is often higher than anticipated.
• Capital investment must be balanced with projected income which means understanding what rent you will get and your running costs.

An error here will distort your investment calculations

There are some attractive tax breaks relating to buying property in the UK. These should be factored into the investment equation. Professional tax advice should be obtained.

• Rental income can be set against a variety of tax allowances thereby reducing income tax liability.
• The most significant of these is loan interest. By “gearing up”, it is possible to structure a “tax neutral” investment. In turn, this provides an enhanced return on the equity contribution.
• One of the most significant tax advantages is that non-resident / non-domiciled investors should not be liable to capital gains tax in the UK on disposal of the property