Property investment is one of the most common ways affluent individuals seek to build wealth and achieve their financial goals – but if you’re completely new to it, the prospect can be daunting. Knowing where to start can feel overwhelming, and working out how to get from where you are now to where you want to be, even more so. But, by arming yourself with the right knowledge, you can set yourself up for long-term financial freedom.
Here’s all you need to know if you’re keen to begin your property investment journey, and some key tips that will help you get to where you want to be.
Get to grips with the basics
As with everything in life, you can’t run before you can walk, so it’s important to take some time to learn the basics before you get started to set you off on the path to success.
There are a few different ways to make a profit from property investment. It can come from rental income, capital gains from selling the property at a higher price, or both – so, deciding which route you want to follow is the first step. You might be interested in buying properties as projects and doing them up to increase the value, or you may simply wish to rent them out and sit on them for a few years until market prices increase – but whichever way you decide to go, you’ll need to have a thorough understanding of the associated costs and responsibilities, as well as a strategy for ensuring you will realistically be able to achieve your goals.
Many newcomers to property investment opt to work with a property investment company, which connects investors with property developers and can help you to find the best opportunities and, in some cases, get you below-the-market prices.
Educate yourself on the risks
Just like with any other type of investment, property investment comes with its risks, and making a profit is never completely guaranteed. And, when investing large sums of money, it’s important to be honest with yourself and realistic about any potential set-backs so that you can ensure you have a contingency plan in place.
The property market can be unpredictable, and prices can fluctuate when you least expect it, so while the idea of buying a property at a particular price and selling it on at a profit later on might seem simple enough, it’s wise to bear in the mind that economic pressures and other factors can sometimes mean that prices don’t climb as rapidly as you’d like, or worse, fall right when you want to sell – so for this reason, you’ll need to be willing to play the long game and if necessary, sit on any properties you’re looking to sell until the time is right.
Similarly, rental market prices can change, which in turn, can affect rental returns. However, with the UK’s rental market in increasing demand, prices are constantly increasing and have been for some years, so this particular risk can be considered less likely unless the area in which your property is located somehow becomes less desirable to live in. If you’re planning on buying to let, then also bear in mind that untenable tenants can be an issue, and late or unreliable payers can put a dent in your passive income.
Then, do what you can to minimise them
While any potential risks can be scary, the good news is that there are some things you can do to minimise them. First, you’ll want to research the property market and get to know which areas are the most desirable to buy in, as well as monitoring current prices and any obvious trends.
Know the population of any areas you’re interested in investing in, and whether they are predominantly young professionals or students, as this is important if you’re looking to rent to a particular group or demographic. Doing so will ensure that you know where to buy and when to see maximum capital growth or rental growth in the long-term and will give you the confidence to make informed decisions.
Do some digging and find out whether any regeneration is planned for specific areas within your investment city, as this can boost property prices and increase growth over time – so buying early and before the work is complete can put you in an excellent position later down the line.
Screen your tenants
If your plan is to buy to let, then knowing what demographic you wish to rent to is key, and screening tenants prior to signing any contracts is vital to save yourself any unnecessary headaches. If you haven’t the time or the inclination to do this bit yourself, then this is where a rental property management company can come into play, dealing face to face with potential tenants and conducting interviews and credit checks to ensure they are the right fit and a reliable choice who will look after the property and pay their rent on time.
It’s also wise to look for a rental agency that offers a guaranteed rent scheme, which will protect you should a tenant default on their rental payments. There are various different types of schemes offered to landlords, so look for one that will take care of all your outgoings, including maintenance, and ensure that your property is returned to you in its original condition once a tenancy ends.