How to begin your property investment venture

If you are looking to get involved in the property sector this blog is for you.

Bricks and mortar are becoming an ever more popular investment strategy. They can deliver strong year-round income in the form of rent.

Before you get started in property investment it is important to weigh up the positives and negatives.

Let us start with the negatives so you can prepare for these additional costs before making your decision.

Potential negatives of property investment

As you will be aware no investment is risk free, unfortunately property is no exception from this rule. The best way you can ensure success in your property venture is to be one step ahead of everything.

The obvious first issue is that property values can increase and decrease month by month, so too can rental values. This means that the value of your property fluctuates. So, when you come to sell your property it could work out extremely well as you may end up selling for more than it is worth or you may have to lower your expectations for its selling price. The rental market also fluctuates depending on demand.

To avoid this happening make sure you invest in an area that is upcoming and potentially has development projects planned. This shows that demand is high in these areas, meaning it is unlikely that rental demand will fall significantly at any point.

Areas such as the North East which are known to have low property purchase prices and comparably high rental prices are ideal. Low purchase costs and high rental prices will provide a very worthwhile return on your investment.

You should always view property as a long-term investment. Traditionally it takes a long time for properties to increase drastically in value. If you are wanting a fast return on your investment property may not be for you, unless you invest in a property which can be bought cheaply, fixed, and re sold for market value (called a flip deal).

You should also consider properties lack of liquidity. If a situation arose where you needed to release funds quickly property may not be helpful. It takes 28 days on average to sell a property in the UK.

On to the positives

Property is arguably the most popular form of investment you can get. This is because it is a physical, tangible asset. It provides long term growth in the form of capital gains when the time comes that you want to sell your property.

When you invest in property that you intend to rent out you can make significant average rental yields of up to 8% (in the North East). These rental payments will cover any mortgage you may have on the property while also providing some extra to you.

The property market maintains stable in times of uncertainty. As coronavirus has proven the housing market is one of the most resilient forms of investment. This is because it is not based on speculation but purely on the forces of supply and demand.

On a more morbid note, it is an asset you can pass down to loved ones should anything happen to yourself. The feeling of knowing your loved ones are taken care of in the worst circumstance is a blessing and may contribute to why property investment has remained so popular.

What do you need to become a property investor?

An initial lump sum

If you are buying cash the amount you will need as a lump sum will be dependent on the location in which you are wishing to invest. You may be planning on buying one property in an expensive area or multiple properties in cheaper areas. In both circumstances you will need varying lump sums of cash.

If you are planning on obtaining a mortgage you will need a large deposit to use in order to gain leverage. You should also have a good credit score and a healthy track record with finances if you are planning on obtaining a mortgage.

An advisor you can trust

It is important to have someone who can legally and financially advise you on whether your investment is worthwhile. They will help you choose which property investment strategy will work best for you.

Should you find a suitable property which you wish to purchase your advisor will also work through the contracts with you ensuring they are in your best interest.

Do your research

It is imperative to do your background research when purchasing a property. You should research the value of similar properties in the area you are planning to purchase in. If you do not do your checks thoroughly enough, you may not make the return you intended on making.

Time

Investing in property takes time. You should not rush any stage of the process; this is how mistakes happen.

Before committing to a property ensure it is right for your aims. Do not rush any decision this big, your financial success depends on you getting the right property.

Remind yourself you are in this for the long hall. What are a few additional weeks for an investment that could provide for you and your family for decades?

How to get started?

Read all that and think property may be the investment strategy for you? Here are my top tips to get you started.

Set your budget

Before doing anything, you should work out how much you have to spend. You do not want to stretch yourself thin to the point where you struggle further along the line to obtain finance. You also do not want to be met with any unexpected fees.

Within your budgeting you should include agent/developer fees, legal and conveyancing fees, and all standard tax you will need to pay. Budgeting all this in in the first instance will ensure there are no nasty shocks further down the line.

Set your goal

Property is a long-term investment. So, what do you want to get from it? Do you want a regular income would you prefer higher capital growth?

Choose your type of investment

Make sure you fully understand every investment strategy. Do plenty of research on Buy to Lets, Build to Rent properties and Purpose-built student accommodation.

Decide on a management option

If you plan on manging the property yourself ensure you know all the rules and regulations required. Be honest with yourself and weigh up the pros and cons of this approach as it can be time consuming.

If you plan on hiring a letting company to undertake all these tasks for you ensure you include this cost when budgeting.

Research potential locations

You should aim to invest in a place which will deliver high long-term returns. Check historic sold prices in the area and whether demand is likely to increase.

Once you have found a desirable location research what kind of property is the most popular there. E.g. for areas that are very family oriented, two and three bed houses will fit in well with this demographic.

If after reading this you have decided that property investment may be something you would be interested, in please get in touch with us to discuss your options further.