The world of property investment is widely known to be a lucrative opportunity for many budding investors.
For years, it has been the go-to choice for those seeking substantial amounts of passive income and considerable capital appreciation.
However, navigating the world of property investment can sometimes be confusing.
This is why, as with any new venture, thorough research is critical.
So, looking for some property investment tips?
Here are 4 things to know before getting started!
Make Sure You’re Ready and Aware of the Risks
Property, like any venture, comes with a certain level of risk.
Some of these risks may include the following:
- Property Price Fluctuations – When you invest in property, you’ll purchase your asset at a certain price with the intention of being able to sell it later for a more considerable amount – which allows you to make capital growth returns on your investment. However, if house prices fall in value, it may be challenging to sell at a price higher than the property’s initial value.
While the property is a relatively stable investment and typically remains quite resilient during economic turbulence, every sensible soon-to-be property investor must consider this risk a possibility.
- Rental Market Changes – Property price fluctuations can affect capital appreciation, but rental market changes can affect rental returns. Like how property prices can dip, average rental costs can also decrease due to certain external circumstances (such as your chosen investment area becoming less desirable to live in) and see lower rates of rental demand.
With the rental market in the UK seeing massive levels of demand at the moment, this is unlikely (particularly in popular cities and towns).
However, you must remain mindful that this can affect your investment and ensure you carry out the essential market research to counteract fluctuations.
- Research is Key
One of the best ways to minimise any potential risks towards your investment is to research the market in detail before signing on the dotted line.
Taking the time to find a flourishing property will reduce the chances of a risky investment by ensuring the strong likelihood of high capital growth and rental market growth.
To find the perfect investment, you should consider all the variables.
Look into past market performance, pay attention to whether an area has a large population of young professionals and students (suggests a stable rental market), and keep up to date with future market predictions.
You should also investigate whether any regeneration occurs in the property’s surrounding area, which could further boost growth.
- Find The Right Strategy
Many different strategies are available to those who wish to invest in property.
One of the most popular investment strategies is Buy-to-Let.
Buy-to-let investment properties are purchased with the intention of renting out to earn rental income.
The pros of Buy-to-Let are:
- You can make large amounts of money over time.
- The rental market is currently thriving, meaning there are likely to be excellent investment opportunities on offer.
- You can make two types of rental returns – rental income and capital growth. This strategy is likely to have the most appeal for those looking to invest primarily for profitability.
The cons are:
- To make a regular profit, you will be reliant on rental income. So, if you experience any void periods with tenants, you may lose a significant amount of money.
- If you don’t employ a property management company, maintaining a buy-to-let property can bring about a massive amount of hassle.
Of course, many other strategies may better suit your needs – again, this is where the importance of research comes into play.
- Plan a Detailed Investment Budget
Having a budget in place before making any significant decisions is an essential part of the investment process.
After all, you don’t want to use your funds to pay way beyond your means for a property that may have the exact same potential as one worth a fraction of the price.
How do you start planning a detailed property investing budget, and what costs do you need to factor in?
You must consider the following:
- The price of the property itself.
- The deposit (If using a mortgage).
- The monthly repayments (If using a mortgage).
- The reservation fee.
- Any taxes – i.e. Stamp Duty Tax, Income Tax, Capital Gains Tax.
- Insurance (such as rental insurance).
So, now you have some grasp of the basics, should you invest in property?
Despite some recent fluctuations, the property market is most likely one of the most potentially profitable (and growing) ventures to get involved with.
Remember though – research is vital.
You will need to keep up to date with the latest developments and perhaps consult an expert property company to get all you can from your investment!