Property investment – throughout history – has almost always been a solid source of generating passive income.
If you’re smart (and have some idea of what you’re doing), investing in property can be incredibly lucrative.
According to the latest from the Land Registry, UK properties are valued on average at £295,000, with prices rising at the fastest rate recorded since 2004 and buyer demand currently twice as high as pre-pandemic levels.
As successful as an investment can be, though, there are some things you need to consider before you’re on your way to becoming a full-fledged, successful property investor – and, for beginners, it can be pretty tricky to get your head around all the various intricacies.
So, if you want to become an expert on property investment, check out these tips to help speed up the process!
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Research is Key
Before fully diving into an investment, you must take the time to fully explore your options.
Like any new venture, you need to know what you’re getting into. Property investment is no different and may even make proper preparation even more vital, especially with the amount of risk involved.
The best way to minimise the risk of being affected by unfavourable market fluctuations is to develop a broader knowledge of the market in detail.
For example, purchasing a property in a UK property hotspot will reduce the likelihood of a risky investment.
You should also look into whether any regeneration is set to happen in the area surrounding the property, as this could further boost growth.
Look into the different kinds of property investment you can get involved with – depending on the state of the market, some could be better suited for your needs.
For example, student property investment is booming at the moment, with many developers finding that they’d already filled 90% of their accommodation units for the 2022/23 academic year by June.
What Kind of Investor Do You Want to Be?
When starting out, it can be very easy to get overwhelmed – this is why it’s essential to keep track of what kind of investor you want to be.
You should start by determining exactly what your goals as a property investor are.
Do you want secure, passive income over time?
Or do you want to focus on capital appreciation and making a more significant profit when re-selling the property?
By asking yourself these questions, you can understand what it is you’re looking for, which can further assist your research into properties that are most likely to help you achieve your goals.
It’s also important to look towards how you want the property to be run.
A full-time landlord can very easily (and successfully) own and manage rental properties as a primary source of income; however, if you’re not ready to leave your day job, there are options to profit from property investment without altogether abandoning your career.
In these circumstances, you can hire a property management company to assist with investments.
These companies can manage your property portfolio on your behalf, so you don’t need to worry about finding a tenant or responding to their issues/maintenance requests – it’s all left in their hands.
Typically, this is a relatively hassle-free approach and is ideal for those who want to take a step back from the time-consuming daily duties and demands that come with owning a rental property – whilst still benefiting from the rewards.
At the end of the day, though, it all comes down to what’s best for you and your lifestyle, which is precisely why it’s vital to figure out what works for you!
Work Out Your Budget – Know Your Taxes!
Setting a strict and cautious budget for your investment funds is equally vital.
The housing market typically remains comparably stable when held up against other investment options.
For example, in 2021, despite the massive strain on the economy due to the pandemic, reports found that UK property prices were increasing at the fastest rate since 2004, with Rightmove finding that buyer demand was twice as high as pre-pandemic levels as a result of pent-up demand caused by three UK national lockdowns.
Essentially, as property is an entirely physical asset, it is much more likely to see growth over time – meaning that the housing market is usually a relatively stable one, sometimes even when other ventures are experiencing economic turmoil.
However, there are still risks to property investment.
You may struggle to find tenants for your property, or there may be issues with the development if you’re purchasing off-plan properties (more on that later!), or the property may experience irreparable damage over time.
In these cases, you will want to ensure that you have the funds to look after the property and, much more importantly – yourself.
Having a tight, managed budget in place before you’ve even departed with your money means you can find the best possible property for the best price.
After all, you want to avoid paying above your means for a property that offers the same potential as a property with a lower price.
Consider the financing options available to you before you begin investing in property.
Whilst paying a property’s total cost upfront is a good way to show off in front of your friends and also means you spend the returns as you wish, it may not be very affordable.
This is where buy-to-let mortgages come in.
A buy-to-let mortgage allows you to spread out your investment costs by paying off the accrued interest each month as a monthly mortgage repayment.
Another option is to consider using a payment plan. With this, you don’t need to pay the total amount right away and can still fully own the property yourself by the time it is ready for tenants.
Most importantly, always ensure that you factor in additional costs, like taxes – and that you are up-to-date with the latest government guidelines.
As of late, these can change almost as quickly as they were introduced – for example, the government’s recent U-Turn on the October 2022 Mini-Budget.
Again, this is where research is your best friend!
Explore Different Strategies
A difficult thing to wrap your head around is the difference between the two main strategies of property investment: Buy-to-Let and Buy-to-Sell.
Buy-to-Let properties are bought with the intention of being rented out to tenants, providing a monthly rental income and steady returns over a long period.
Buy-to-Sell, on the other hand, involves purchasing a property with the intention of re-selling it later on for an increased price – after a period of refurbishing and adding various improvements.
Typically, buy-to-sell properties result in a substantial one-off cash payment, so long as the investor makes the right improvements to increase its value and can find the right buyer once it’s ready to sell.
Now you should know some of the basics of getting started with property investment in the UK.
Before you go running off to find your next venture, however, it would be amiss to not remind you that this article is just an overview of an entry-level introduction to property investment.
To succeed in this area, you must do the reading!
Ensure you’re up to date with the latest strategies, trends and techniques.
Don’t despair, though! With demand for UK property still very much present and not enough worrying signs to be concerned with, this could be the perfect time to consider investing in UK property!
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Millie is a perfectionist with a passion for property and writing articles. You’ll find her researching the latest housing trends and the newest up and coming areas worth investing in. Read more about Millie here.