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You’ve seen the films - you know the ones we’re talking about. A family pulls up outside a suspiciously palatial home in the suburbs, complete with picket fence and a large ‘for sale’ sign embedded in the manicured lawn. They smile, watch their children frolic on its wrap-around porch, then offer the (again, suspiciously) accommodating estate agent those three magic words:
“We’ll take it.”
Next thing we know, they’re loading up the moving van while convincing their reluctant offspring that it’s all terribly exciting.
Anyone who’s ever purchased a property knows that this enactment of the buying process isn’t always accurate. Whether you’re looking to invest in Buy-to-let, or hoping to turn a sales profit on below-market-value property, the process is never as straightforward as you’d hope.
That’s not to say it isn’t worth it. In fact, despite taking a nosedive earlier this year, the UK housing market is making a rapid recovery.
Before you reach for your cheque book (or your credit card, just in case you aren’t reading this in 1954), consider the following tips for first-time property investors!
1.Choose your strategy
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Before investing, stop and ask yourself what your game plan is.
Are you after short-term gains, or are you in it for the long haul?
Are you buying-to-let? If so, what are the rent yields in the area you’re considering? Have you thought about the demographic of potential tenants?
If you’re buying to sell for profit, there’s still plenty to factor in. What’s the average ROI on house sales where you’re browsing? How much work does the property need in order to increase its value - and do you have the extra capital needed to make this happen?
Deciding on what you plan to use the property for before you start shopping will provide clarity - and keep Buyer’s Regret at bay!
2. Check out the local area
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Investing in a property based on price alone is a mistake. Alongside this rookie error is purchasing property that’s visually stunning - but in the middle of nowhere!
Whether you’re looking to rent it out or sell it, your property needs to be situated somewhere that people actually want to live. Demand is everything and without knowing the demand of an area inside out, you won’t be able to make a successful and informed decision about your investment.
Consider the following criteria:
Shops – how close are they, and are there enough of them?
Transport links – how are the local trains, buses and motorways? Where is the nearest bus stop, is it within walking distance?
Schools – are they walking distance, and what is their Ofsted rating?
Investment – are there any developments planned to boost revenue? What are the local council plans for the next 3-5 years?
Employment – are there jobs nearby for tenants, and are there enough of them?
It’s vital to take all of these things into consideration when looking to invest.
3. Ask a professional who has done it all before... and more!
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While it’s true there are a lot of attractive offers for buy-to-let investors (such as low interest rates and the current stamp duty tax break), the fact remains that it’s far from a simple process.
Investing in a property is a big commitment. Unless you’re a cash buyer, there’s still a mortgage to be taken out, as well as estate agent fees, renovation and maintenance costs, plus the risks of taking on unruly tenants or cease to pay rent.
If you happen to know anyone who has invested in buy-to-let, or turned a profit on a house sale, ask them to share their experience with you.
They'll be able to offer first-hand advice about the do's and don'ts around property investing - and unlike those who'll have a vested interest in your money, their feedback will be totally objective.
4. Determine your Budget
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This one goes without saying - however, it's surprising how many potential investors jump right into major projects without properly assessing the financial risks involved.
While cash buyers have the advantage of bypassing a mortgage, loan eligibility is still a big factor. What capital are you going to use for any necessary renovations? Do you have enough, or will you need to borrow?
Those needing a mortgage should consider what kind of loan to apply for. Buy-to-let rates are currently low and there are lots of tempting offers out there. Having said that, if you're looking to sell the property, you won't be eligible for these and if the market dips, you may end up with a loss.
If you haven't got the means to cope with these potential hurdles, you may want to hold off on investing until you can build up a bigger reserve of money.
5. Bring in the experts
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You've probably heard the saying, "It takes a village to raise a child". Well, your investment property will be your baby - cherished, loved and, occasionally, the cause of many a sleepless night.
Unfortunately, Nanny and Grandad aren't the kind of 'village' your infant portfolio needs to thrive. Rather, consider building a winning investment team to rally around you that's comprised of the following:
Mortgage broker
Solicitor
Sourcer (company or individual)
Mentor (professional or personal cheerleader)
Builder/contractor
Accountant
Outsourcing these skilled tasks to trusted, reputable individuals will give you peace of mind. It will also save you a considerable amount of money in the long run.
Let us be your 'village'!
If the thought of sifting through reams of options is giving you anxiety, why not let Winova handle the specifics? We have our own team of hand-picked experts at your disposal.
Contact us today to get that investment ball rolling.