7 Things You Need to Know Before Investing in Property
There are some things you definitely need to be aware of before investing in property. Over the years, there have been some horror stories of people getting into the property market and coming out the other end worse for wear. Therefore, we are here to help you understand the elements surrounding this industry with our guide to property investment. Budding investors and hopefuls looking to make their way through the property market should heed our property investment advice as it could make all the difference to their success.
There are several things that you should take into consideration before investing. When observing the property market and how up-and-coming investors look to approach it, there are a few tips we can offer. You may not have been aware of some unofficial property investment rules when venturing out in property. These tips will help even the most seasoned investors diversifying and expanding their portfolios, as well as newcomers starting out.
Here are seven things you need to know before investing in property:
Extensive Due Diligence and Education
When it comes to investing in property, education is key. Reading up on how to source good investment properties is as important as knowing the regulations surrounding investment strategies. The more you know and understand, the better you will be able to approach your current or next property investment.
Similar to most wealth-driven industries, it is crucial you only deal with education property resources from reputable sources. A key thing to do is to look for sources with a proven track record. With property investing, there are some great resources available that are FREE. For a selection of respected sources, check out our blog here.
Giving yourself a real property investment education does not stop once you have started in the industry; it should continue throughout your property investment journey. Learning at all times, even when on the job, is the best way of constantly improving and perfecting your craft. Be sure to listen to first-hand accounts from fellow property investors and developers; experiences they have had will help you produce better contingency plans and avoid any hiccups they may have encountered.
Head over Heart
When considering a new site or property for your first/next property development, the best thing to do is listen to your head rather than your heart. If your heart tells you that the property or project you are looking at is ‘the one’, then question why? Is the possibility for return on investment there? Does the location offer enough for your target market? How much work is involved with the development you have planned, and what will this cost you? Remember, this is a property investment, not your dream property. The differences between your head and your heart are astronomical when it comes to investing.
Be logical with your choices, hunt for cheaper developments and build your way up from there. Gaining experience will help in the long run, and the decision and planning process will only get easier with each successive investment. In the meantime, seek advice from other property investors or sign-up for some mentoring sessions with an expert. Another tip is to be ruthless when negotiating your prices, as you want to increase your returns wherever you can and keep money aside for your contingency.
Start Small – Work your Way Up
Even if you have built up a lot of income in preparation for your first property investment, it would be wiser to start as small as possible. Again, to begin with, learning is the best policy. If you invest most of your money in your initial property investment, you stand the chance of losing your pot if you make too many wrong decisions. To secure your opportunities of a ‘next time,’ do it incrementally and get that experience built up first.
With buying low, you have the chance to sell high and come away with a better percentage overall than if you invested more in the first place. Just remember that a lot of the profit in a property investment comes from renovations and conversions, so make sure you have a secure budget with projected profits exceeding what you have put into it. Nobody in this industry wants to make a loss, so it is crucial you put together a clear and realistic contingency plan too.
Consider your Finance Options
Whether you are a first-time or a seasoned property investor, you will always have a choice when it comes down to financial aid. It is an important decision; your property investment’s success will depend on the financial strategy you choose. From bridging loans to specialist mortgages, the best course of action is to gain advice from a trusted specialist intermediary or master broker.
As with any aspect of property investment, it is paramount you carry out your due diligence first. Choose an advisor who has a solid reputation that is visibly backed up by years of experience. Without an expert’s inside knowledge on all the finance models available, navigating your financial options can be difficult.
Manage your Tax
Similar to knowing and understanding your financial situation, you also need to be aware of your taxes as a property investor. When you receive a passive income from property investment, your rental income could be taxed depending on three factors. If your income falls under residential letting, furnished holiday lets, or the Rent-a-Room relief scheme, then these rents will be considered for tax purposes. However, there are ways you can reduce the amount you payout. With the help of a trusted tax advisor, you can gain guidance on how to claim back expenses, reducing your tax bill.
Another tax you will need to be aware of is Captial Gains Tax (CGT). CGT is applicable when you come to sell an asset that is not your primary residency or you have not lived there within the past three years. If you are unsure about what taxes you would need to budget for, we recommend speaking with a tax consultant and seeking expert advice.
Choose your Dream Team
Each property development project benefits from you teaming up with the right professionals at every stage of development. To complete your property investment to the highest quality, you’ll find yourself working with your own development power team to guarantee your success.
The more projects you take on, the more you will be able to fine-tune and elevate your power team of professionals. Over time, you will find yourself surrounded by a dedicated group of experts you can trust to get the necessary work done to the highest standards.
This dream team will start with your solicitor, mortgage broker, tax advisor and accountant whilst you source and secure a property deal. As you move into the development stage, you will find this list only gets longer! Ensure you speak to your fellow property investors and developers to get reviews and advice on who you can contact at your different steps.
If you are considering teaming up with a commercial partner or a Crowdfunding partner, you must assess whether you share similar targets and ambitions.
Learn From Others – How Property Summits Can Help.
The best way to gain a broader understanding of property investment is to learn from others. There are many lessons to learn, and speaking and listening to others regarding their property investments and developments help gain insight, such as the experts here at Property Summits. With our knowledge and expertise spanning the property markets’ length and breadth, our anecdotes and advice can help you widen your property horizons. Register your interest here.
We have all had our own experiences and are glad to share them on a regular basis with up-and-coming and seasoned investors alike. Make sure you are following the Property Summit’s experts on their social media platforms. Nowadays, people are only an email, a post or a social media message away and more than happy to support fellow investors. It does not matter if you have little experience or a lot of experience; everybody can learn something from someone else in the property field.
We hope you have learnt a few things about the trade with our seven handy tips. You can be sure there is plenty more advice out there too! For more information and guidance, make sure you tune in to our subsequent discussions and podcasts for a rounded view of the latest news in the property market. Our team of experts is also on hand to offer advice on their social media pages, personal websites, and YouTube channels; you can see their specialities here.
We recommend seeking independent financial advice and carrying out your own thorough due diligence to your unique situation before going ahead with any investment option you may be considering.