Investing in property is a fantastic opportunity to secure an impressive return on investment in a stable, growing market. There are many considerations when looking for your perfect property, and we have gathered some of our most valuable property investment tips here for anyone considering investing in buy to let.
Read on to find out more…
TIP 1: Grow your knowledge and educate yourself further if new to property investing
The basis of property investment is understanding the market and knowing the ins and outs of the process. This may seem obvious, but it cannot be emphasised enough.
The proposition is simple enough – buy property, then rent it out. However, as with anything, there are layers of complexity under the surface, and understanding them is key to becoming a successful investor.
There is no strategy that fits everyone, so knowing your own personal objectives will help you to understand the market and invest as securely as possible.
TIP 2: Be aware of the risks and do thorough research
The number one way to lose money when investing in buy to let property is not doing your homework. Information on location, the property market, taxation, legalities, mortgages, property management and much more is all readily available. If you are not sure, experts like the Alliance Investments team are on hand to help.
If you are not aware of the risks and don’t do enough research, you open yourself up to rash decision making which could affect your investment negatively. Research is all important – read on to learn more about specific areas where you could spend your time productively.
TIP 3: Plan your long and short term strategy
One of the biggest upsides of investing in property is that it comes with two separate income streams: capital appreciation and rental income. The former represents your profit over the initial purchase price if the market rise, and can yield both short- and long-term profits. If you buy off-plan, at a below market rate direct from the developer, your capital appreciation can be magnified.
Rental income, or “yield”, is a monthly income and will accumulate naturally over time. This is a more long-term prospect and can be maximised by purchasing in an area where rents are forecast to go up due to growing populations.
These two income streams allow you to plan a dual strategy where you can profit in the short- and long-term depending on your objectives. By purchasing in the best property markets, you can get the best of both worlds. Learn more about where you can find these markets by reading on below.
TIP 4: Consider type of property to invest in
There are many different types of property investment available, and which one suits you will depend on your objectives. All types have their pros and cons, so make sure to consider your preferred property type carefully.
For example, a House in Multiple Occupation (HMO) is a lot more work when it comes to letting and management due to the multiple tenancies and potential for more frequent and costly maintenance issues.
On the other hand, an off-plan property managed by a professional agent (see below for more) can be an entirely hands-off investment which requires no day-to-day work from yourself while still being highly profitable for time-poor investors.
TIP 5: Research location
Finding the right location for your investment is arguably the most important tip of all as it can make or break your portfolio. Put simply, you should find the places people are moving to and invest there.
You can work this out through researching population growth data, looking at where big multinational companies are opening new offices, finding out which cities are planning or undergoing significant regeneration, and where the major infrastructure investments like HS2 high speed rail will lead.
Once you have looked at these, identify which cities meet the above criteria and also have a shortfall of available properties to maximise your chances of making a strong, profitable investment. Cities such as Manchester and Preston are two fine examples of the above theory in action, and investors are flocking to both markets to take advantage.
TIP 7: Be financially organised and instruct a financial advisor
Property investment is a business, and you should view it as such when putting your money in and growing a portfolio. Like any business, being organised is a key factor in success, especially in financial areas.
You should make sure you know where your money is going, what your monthly rental income is, where the outgoings are with property management and other expenses, and what your projections for future income are. To help with all of the above, we recommend appointing a qualified financial advisor from the start to ensure you are on the right track.
TIP 8: Plan and stick to a budget
Investing in property is, in many respects, the same as investing in anything else. The best example of this is budgeting, and more specifically how you should plan and stick to yours.
We recommend conducting a thorough and honest audit of your finances before working out exactly how much you can spend comfortably without creating an unacceptable level of risk for yourself.
When it comes to buying, you should make sure to not overstretch your budget as this could lead to financial troubles down the line. Property is one of the most stable investments available, and an excellent medium- to long-term prospect. It rewards those who can take the long view and plan for the future, with sensible and realistic budgeting a major part of that.
TIP 9: Consider property management
Looking for a tenant and managing a property is a lot of work and should not something that can be carried out via shortcuts. It is a time consuming job with many different elements, including:
- Administration and contracts
- Marketing your property
- Undertaking viewings
- Annual fire, gas, electrical safety checks
- Maintenance and repairs
- Inspections
- Inventories
For a small monthly percentage of the rental income, you can have all the benefits of being a landlord with none of the hassle. Searching for the right letting agent requires due diligence, but most developers or sales agents can recommend a good one.
TIP 10: Consider mortgage products
When investing in UK property you will need to have some capital on hand initially in order to pay the deposit and any first stage payments that are required. The amount will vary depending on the property, so make sure to check with the developer or your sales agent before committing to the purchase.
The final payment – or balance – can be made via a mortgage rather than as a cash payment, and you can arrange this ahead of time. The amount you can borrow will depend on your income, how much a firm is willing to lend you and the time frame you need to borrow within to complete your purchase. You can find out more about mortgages by reading this article and, as always, please make sure to see the advice of a qualified advisor. If you are unsure about where to find one, we can direct you to a reputable firm who have experience of the investment market if required.
That is our final tip for investing in UK property in 2024 – but if you would like to learn more about the best UK buy to let locations and our available investment opportunities, get in touch with our team today by clicking here.
