How to Invest in Property: The Steps You Need to Take
If you’re looking to get on the property ladder or expand your current portfolio further, our simple guide to property investment can help ensure your investment is off to a successful start. At first glance, investing in property can seem like a to take on and consider; however, if you break it down into manageable steps, you can be sure to consider all the necessary factors without getting overwhelmed.
At the end of the day, investing in property can be an extremely lucrative business, so we have put together a six-step checklist to help you guarantee a maximum return on your investment. For first-time investors and seasoned investors alike, read on to find out our six tips on how to invest in property.
What would you like your property investment to do for you?
An important question but one that is often overlooked. Why would you like to invest in property? What are you trying to achieve? Depending on how you answer this question will influence which property investment strategy is right for you.
Are you looking to invest in property for a means of income? Is this some extra money on the side, or are you looking to start a new career in this market? Or, perhaps, you are aiming to keep your savings safe by investing in property?
It is important to note that you have to be prepared to accept the risk that comes hand-in-hand with any financial investment scheme. Similarly to the stock markets, some investment strategies offer less risk than others.
What property investment strategy helps you achieve this goal?
Once you have worked out what you want to achieve with your property investment, you can weigh up your best way of making this a reality. Put simply, which type of property best suits your objectives, leading to which location you should be considering.
For most investors, investing in property is a medium to long-term investment. Many find that residential property and the buy-to-let market satisfy their objectives. The bricks and mortar you purchase or develop provide you with an asset for capital appreciation while obtaining an income from rental fees.
To find out more about the different property investment strategies you can choose from, visit our blog on ‘Should I Invest in Property?’.
How are you going to finance your property investment?
With a clear objective and plan of action, your next step is to get your head around the numbers. Property financing is a huge business, and there are many different options available to you. The best course of action is to gain advice from a property finance expert and master broker.
This is not a step to be rushed; make sure you clearly understand your budget, limits and options. There are many options available aside from the well-known buy-to-let mortgage; from bridging loans, first charge and second charge mortgages, as well as commercial mortgages and development finance, there is a lot to consider.
Do your research! How can you reduce any risks with your investment strategy?
This step may sound like common sense; but, it cannot be stressed enough how crucial it is to complete thorough due diligence before you buy. Proper analysis of a property will remove a large amount of your unnecessary risk. Buying a property ‘blind’ means there will be hidden factors and risks that will surprise you along the line; this can increase your time frame and, frankly, can eat into your return on investment.
Before you jump at a property deal, make sure you weigh up all the factors of the property. For example, keep in mind questions such as:
- How much are similar properties selling in this locality?
- What rent can these similar properties achieve?
- Is there a strong tenant demand? An insufficient demand could mean the property will be sitting empty for long periods, which will cost you money.
- Is there a strong owner occupier or investor demand if I ever need to sell to get my money back out?
- Will the rent cover my mortgage payments, management fees, repairs and other likely costs?
Develop your property development, power team.
Property investing is not necessarily a solo venture; with so many different aspects to consider throughout a project, property development will call on many specialists’ expertise and know-how. You cannot be expected to learn and develop or these skills yourself; therefore, you will need to build up a team of people you can trust from recommendations and your own due diligence.
This power team of professionals should include: a switched-on solicitor, one who appreciates his role is to help you in your property venture; an accountant, it will help you if they have a good understanding of property and business taxation; a mortgage broker, to help you benefit from the best financing deals; and estate agents, this will help you will sourcing the best property deals.
Always improve and update your property education.
As a first-time investor, you want to absorb as much information as you can about property investment. Find out first-hand anecdotes from seasoned property investments and learn what approaches they took. By taking the time to see how they avoided problems or how they overcame hidden issues, you will be able to plan your property investment more thoroughly. In learning from successful property entrepreneurs, you will be more aware of the processes you will encounter and, more importantly, how to prepare for them.
There’s plenty of free educational resources online, as well as books, ebooks and guides. Read as much as you can! If you’re looking at stepping into a landlord’s shoes, you’ll need to make sure you have a basic understanding of tenancy law and health and safety regulations. Put some time aside to read up, as it’ll only catch you out further down the line.
No matter how many years you have been investing in property or how large your property portfolio has become, there is always something new to learn. Stay up-to-date with seasoned property experts and commentators, and make sure you’re watching discussions and podcasts to help you get a well-rounded view of the latest news in the property market. Read our blog on how you can keep up-to-date with property investment opportunities.
Once you’ve got a clear and thought-out plan for your first or next property investment, what are you waiting for! With mentoring options and consultations from successful property investors and property commentators, you will discover plenty of support for fellow investors. And, of course, the Property Summits experts are all on hand offering help and advice on their social media channels, personal websites and YouTube channels.