No matter if you are taking the first steps on your property investment journey, or if you already are an experienced investor with an investment property portfolio, we hope that this article will be of use to you.
Property investment is all about maximising your return on investment. The tips written below are designed with this purpose in mind. Like other forms of investment, investing your money in property is not without risk. Property prices, despite common misconceptions, can fall as well as rise. There are risks of getting a bad tenant in your property or having periods with no tenant at all. Of course, there is the ever-present temptation of taking too much on, over-exposing yourself, and leaving yourself with too much debt to pay off.
Get things right, and property investment can be an incredibly rewarding experience, both for your lifestyle and as a source of income. To help you improve your returns, and reduce the risks involved, here are ten top tips for property investment.
1. Look For Up-And-Coming Locations
The primary factor for increasing property prices is an increased popularity in a particular location. Popular locations can even buck national declines in the property market.
Of course, predicting the rise in popularity is challenging. Look at locations where transport links and infrastructure are being upgraded or developed. HS2 is a prime example of areas that may see a rise in popularity soon.
Getting into an up-and-coming location early can protect your investment from dips in the wider property market over the long term.
2. Start Slow and Steady
Going too large, too soon, has led to the downfall of many property investors. Try to make your first two or three property investments ones that are as safe as possible.
Types of investment to stay clear of in the early days, include complete rebuilds, multiple-home developments, and listed buildings. These investments come with a considerable amount of additional risk (and reward), and they should only be taken on when you have gained some experience.
Even with experience, you should still seek professional assistance when taking on these types of property investments. Failure to do so could leave you out of your depth.
3. Adopt Careful Budgeting
The key to successful property investments is making sure you have a grip on the finances. If numbers are not your strength, then consult with an expert, or become proficient yourself.
Before you purchase an investment property, you need to prepare a budget for all of your expenses. Your spending will include things such as legal fees, materials, labour, utilities, etc. You should also consider setting aside an amount of cash as contingency funding for unanticipated spending.
Another financial aspect you will need to consider is the return on your investment (ROI). Your ROI from selling the property at a profit will be different from your ROI from renting your property.
4. Bid Smart At Auctions
Savvy property investors make their profits when they buy their property, not when they sell it. This piece of advice will steer you towards bidding smart at auctions.
A property auction can be a hazardous place if you let your emotions run away with you. Before you start bidding, you should know your ROI for the properties on which you intend to bid.
Keep a level head, and stick to your bidding plan. Doing this will ensure you don’t pay over the odds for a property just because you like its look.
5. Make Best Use From Available Space
When you’ve bought your property, using the space as well as possible will help you maximise your ROI. Think about installing en-suite bathrooms if the bedrooms are large enough to take one. Creating an extra bedroom will also increase your property’s value. A large bathroom can be converted into a small bedroom or split into two, with one half becoming an en-suite. Adding more space through an extension can provide you with at least one new en-suite bedroom.
Different properties offer different opportunities for creating new space and making the best use of what you already have. These are two guaranteed ways to increase the value of your property and maximise your ROI.
6. Seek Local Knowledge
Talking to local property developers and experts is an excellent tip for property investors. This one is particularly key if you are a new property investor or investing in a new area.
Whenever you have a knowledge gap, seeking local knowledge is the best way of bridging it. Local property investors and estate agents will usually be more than willing to advise on your investment opportunities. However, understand that speaking to an estate agent who represents the vendor may lead to you getting skewed advice.
7. Search For The Lowest Mortgage Rates
Whichever method of funding you are using, such as buy-to-let mortgages or bridging loans, make sure that you search for the lowest borrowing rates.
Mortgage advisors may be able to access rates that you cannot as a retail customer, so these are worth consulting. However, do your research as well. There is a load of comparison websites that will show you results in minutes. If you find a great deal online, go back to the agent, and see if they can better it.
8. Spread the Risk
Diverse property portfolios are usually healthy ones, the reason being that you have spread your risk to protect your invested capital. As with any investment portfolio, it is not good to have all your eggs in one basket.
Apartments and flats can be the easiest way of buying your first few investment properties, and the most profitable. However, start to diversify your portfolio as soon as you can with a range of different types of properties.
Think about introducing houses, student accommodation, HMOs, and properties in different areas, even in other countries. This level of diversification will provide a property investor with a reasonable degree of security in the long term.
9. Employ the Services of a Good Accountant Who Understands Property
A good accountant shouldn’t just be the person who balances your books and files your tax returns. Your accountant should help you run your business in the most tax-efficient way possible, helping you maximise your profits.
Good accountants tend to charge more than common ones, but the money they will save you will more than offset what you are paying them. With constantly changing tax laws and regulations, having a good accountant in your corner is essential for any property investor.
10. Develop Your Network of Trusted Tradespeople
The more properties you invest in, the more work you will do on renovations and maintenance. You will start to build up a sizeable network of suppliers and tradespeople, and you will know which ones are reliable and which are less so.
So, over time you will develop a network of tradespeople you can trust. Ensure that you maintain that trust by paying your tradespeople a fair rate and paying them on time.
Property investment can be an incredibly rewarding experience. Follow these ten top tips to reduce the risks of investing in property, and maximise your returns.