Buy to let investment property

What to consider when deciding which property to invest in

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The money-savvy who want to branch out from stocks and bonds may be thinking about investing in property. A lot of people are attracted to this way of investing as they believe it involves nothing but buying a home, renovating it and quickly selling it on or renting it out for a profit but realistically, there is a lot more to it than just that. Factors like choosing the right property, finding the right tenants and keeping up with maintenance all take money, time and commitment. Here are a few things to consider before you dip your toe into the property investment pool.

Where do I want to invest in a property?

The first thing you need to consider once you’re set on investing in a property is where exactly to do so. It may be that you wish to invest in a property abroad to use as a second home during certain times and to rent it out to holidaymakers during the rest of the year. If this is the case, you’ll need to think about applying for a mortgage abroad and the pros and cons of this. Spreading your wings overseas can sometimes seem like a more affordable option to the UK housing market, but you need to think about your foreign property investment a lot more carefully than you would if you were staying put. The foreign property dream can quickly turn into a nightmare if you don’t consider things such as currency conversion and differences in legal issues from country to country. Whether at home or abroad, you will need to be aware of the number of listings and vacancies that are currently available near your new property. High vacancy rates can sometimes lead landlords to lower rent to gain tenants whereas low vacancy rates allow them to raise the rent. Another thing to consider regarding the area is the potential for future development that may occur there. The local planning department should be able to provide you with information on confirmed development plans for the vicinity. The construction of a new shopping centre, for example, may indicate a good area of growth, something that can only mean an opportunity for more sought after properties and thus, higher rent.

What do you want to use the property for?

Is it your intention to buy an investment property to have an available second home or do you want a property that will yield a yearly profit through renting? Deciding this before you buy will stand you in good stead for finding a property to fit the purpose. In regards to the latter, a lot of property investors tend to go for a property that they know will yield the most income from year to year. These tend to be larger properties that prospective landlords can make into a House in Multiple Occupation (HMO) whereby a number of tenants under the same roof have separate contracts. On the other hand, you should never invest in a second home and rely on it solely for most of the year to cover repayments. The market for holiday let properties is already saturated so you may not be able to maintain a consistent tenancy.

Do I have the time and commitment to invest in a property?

A lot of people underestimate exactly how much time and effort it takes to invest in a property. From start to finish, you’ll have to make sure that you are willing to dedicate a lot of your spare time into the refurbishment, maintenance and long-term upkeep of the property whether you’re renting it out to others or keeping it as a second home. Those looking to make property investment a full-time opportunity should map out a business plan and a detailed budget. A high level of organisation at the beginning of the process will help you identify both the long and short-term implications. Follow your business plan as closely as possible but always be willing to adapt if certain issues arise.

How much money will investing in a property cost?

Obviously, the amount of money you’re willing to invest differs from person to person, and those seeking larger properties or properties in a sought-after location are bound to pay a lot more. It’s not only the cost of the property and the mortgage that you need to consider, however. You will encounter a number of buying and selling costs such as estate agent and surveyor fees, stamp duty, land tax and solicitor’s fees which ultimately all add up and may see you out of pocket in the short-term. Those willing to make the investment will begin to see the fruit of their labour over the course of time, especially if they decide to rent a property in areas with a high demand for property such as Leeds and Manchester. A buy-to-let in Manchester, for example, could give you a very high rental yield, particularly because the city is currently receiving a lot of infrastructure development.

It doesn’t matter whether you decided to invest in a property in the UK or overseas, there will always be a lot of factors to take into consideration. When you find the ideal investment property, make sure to keep your expectations realistic, and your finances accounted for so that you know you’ll be covered if anything goes wrong. Sometimes waiting for a rental property to yield a profit can seem like it takes forever, but the key is to remain calm and keep your eye on the ball. Investing in property does not start with buying another home, it starts with a solid and detailed plan that you can stick to and begin to feel the benefit of your investment whether that comes in the form of money or relaxation.

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