Investing in property can be a daunting endeavour, especially if you’re a beginner with little to no experience.
But that doesn’t mean you can’t do it!
Even if you’re a full-time professional with no time on your hands, looking for a more stable, profitable way to invest your cash for retirement, investing in property is one of the best, if not the best, solutions to growing your capital over time.
Whether you’re an experienced investor with a portfolio of properties, or are simply looking for your first investment, then this is guide is exactly where you need to be!
We have put together our 65+ years of experience to provide you with 19 important tips to take into consideration before investing in property.
By reading this article, we can help you make more informed decisions before expanding your portfolio or making that first investment.
So, without any further ado, let’s begin.
1. Consider your own situation
Before you decide on any investment, you need to figure out what your goals are and your level of risk tolerance.
Property investment is not quite the same as investing in, for example, penny stocks where if your risk tolerance is low you can immediately sell your stocks at the first sign of a loss. Property is typically a long-term investment, so you need to be prepared to let your money grow over a period of years.
There needs to be a financial roadmap drawn up to identify whether your financial situation can support this type of investment.
For example, a doctor earning £50,000 might have accumulated £100,000 in a savings account but isn’t happy earning 1.4% annual interest. As inflation is eating into his hard-earned income, he is actually losing money.
Due to the doctor’s busy working life, he doesn’t mind investing his money into a long-term investment plan so long as he can earn a healthy growth rate that beats the national inflation average, so he decides to invest in a fully managed property investment portfolio.
Now he earns over 5% NET returns every year, which is double the UK inflation rate. He can also live comfortably off his annual working income, allowing him to leave the investment growing over a number of years without having to sell.
With an intelligent plan, you will gain financial security over many years and benefit from managing your money.
The next step is to consider an appropriate mix of investments which will help diversify your property portfolio. This is relevant if you’re buying multiple properties for your portfolio.
There are a whole range of different property investment class that are to be discussed in more depth further through this article which will give you the knowledge necessary to grow a diverse property portfolio.
The reason you may want to consider diversity is that some economic events, such as the recession of 2007, effect some property classes more than others.
For example, investing all of your money into an off-plan property (a property development that is yet to be completed).
If a major economic event causes the property market to dip, there is always the possibility of the development taking longer to be finished than initially scheduled, meaning your money is stuck in an unfinished development.
Now let’s imagine you’ve put half of your investment capital into an off-plan development, and half into a fully built, tenanted buy-to-let apartment.
If such an economic event were to arise, you would only truly risk half of your investment. This is because, when property prices drop, rental demand goes up.
So while you’re off-plan investment may be at risk, your buy-to-let property could possibly start earning more income as a result.
It is always best to spread your investment amongst a wider range of property classes as this will reduce the risk of losing money.
Its common sense: don’t put all your eggs in one basket!
Another essential consideration to make is putting money aside into an emergency fund in the event of any unexpected incurring costs.
This emergency fund can be useful in a range of different scenarios, but the biggest and most realistic of them all is that there is always the potential for void periods which in layman’s terms, means that you will have no rental income coming in.
If you’d like to know more about investing in the UK, one of our property experts can offer you a no-obligation consultation to discuss your investment goals. We will then be able to formulate a strategy based on your current circumstances in order to help you make the best investment decision possible.
2. Find the best locations to invest
You should approach property investments like starting a business where the first port of call is to conduct thorough market research. In this case, research the best locations to invest.
The reason for this is that some cities have higher annual growth than others. Similarly, some cities have postcodes where properties generate considerably higher rental yields than others.
For many years, the South was the hotspot for property. However, the emergence of the Northern powerhouse has taken the lead to transform the buy-to-let market.
This has resulted in certain Northern cities outperforming the UK market averages because of their economic and population growth.
Some of these cities include Liverpool and Manchester, both of which have seen, and are seeing further, regeneration changes and billions of pounds being invested into skills, innovation, transport and culture.
Keep in mind that property investment is a sizeable investment to make, so researching the top locations to invest is one of the most important tasks you should carry out pre-investment.
When looking for the right location, it is also important to consider things like transport accessibility, tourism, Universities and institutions nearby, and also shopping districts to name a few.
Let’s use the city of Manchester for example.
Manchester has endured tremendous growth in recent years for its vast shopping centres, housing districts, networking, and tourism hotspots like Old Trafford stadium.
It is also home to two of the biggest universities in the UK, which promises to deliver over 100,000 enrolling students every year. Students need somewhere to live and so accommodation with strong network links are hard fought for.
Choosing to invest in a student property or Buy-to-Let property in a strong location close to campuses and public transport would give you less concern of finding new tenants or the potential for void periods.
Important note: One of the biggest mistakes many property investors make is following their heart instead of their head when deciding where to invest.
A particular town/city being a regular vacation spot of yours or perhaps sentiment to your childhood home are two considerations you do not need to make.
Remember, this property is an investment which sole purpose is to make you money. The numbers matter most!
Our property experts can offer free advice on the best UK locations to invest.
3. Consider Investing in off-plan developments
Off-plan developments are properties that are purchased before or during the construction period of the building process.
Now, you may be thinking “Why would I want to purchase a property which hasn’t even been built yet?”.
A key principle in property investment is that in order to gain the most lucrative possible return, you need to be patient and be in it for the long run.
This principle is especially applicable to off-plan developments; although you might have to sit on your investment for months, or even years, the value of the property will grow far faster than any other property investment.
This is because the developer will usually reward your trust and commitment by selling the property at a discounted price. If you were in the market for more than one property at a given time, some developers may even offer additional discounts as an added incentive.
As previously mentioned, the value of these properties will rise during the development stage, which will mean that if your circumstances change and the timeframe of your investment is shortened, then you may be able to sell upon completion and make a profit.
However, if you are capable of keeping your investment then you can benefit from a regular rental income all the while sitting on the rising value of the property.
Purchasing an off-plan property is slightly different to buying a built property from a financial perspective. This is because as well as the payment of the deposit, which can sometimes reach as high as 50%, you will also need to pay a reservation fee, which is deducted from the final payment of the property. This is usually in the region of £5,000-£10,000.
However, one less cost to be concerned with is management costs as the property will require no hands-on management from the investor.
Any investors biggest fear is securing the purchase and rights to a property only to discover a long list of problems which will need to be paid for and fast. Off-plan developments are brand new which means that there is no need to concern yourself with any unexpected major costs.
If a tenant happened to unearth a leaking ceiling, then be assured that many developers will also offer a signed warranty for any structural problems for up to 10 years, as per your agreement.
There’s also the benefit that most new build projects come with state-of-the-art features, which will often include energy efficiency and environmentally friendly specifications.
These brand-new features might have a greater pull on young professionals, which are typical tenants in cities like Liverpool and Manchester.
In fact, the North West has recorded the highest rental yields than anywhere else in the entire country. So much so, a totalled 291,620 tenants moved from London to the Northern powerhouses in 2016, which can only suggest that there is a large growing market for higher quality rental opportunities in the North.
4. Consider investing in student property investments
Student accommodation is a great choice if you’re looking for high rental yields.
You might not be aware of the rising demand for student property as a result of universities accepting a record number of students in recent years.
From 2017 and 2018, a total of 2.3 million students attended UK institutions according to the HESA Student Record. Education in the UK is so reputable across the globe that 38% of students come from countries like Hong Kong, China, and Malaysia, to name a few.
An increasing number of students are willing to pay a premium price to live independently in private studios which are based closer to university campuses and come complete with high speed internet and private living space.
It may also prove to be cheaper to purchase a PBSA over an old student house which might need a little more renovation than a simple lick of paint.
Purchasing a PBSA will take away stress and expense of rendering the property to suit your tenants as the relatively new builds may have an up-to-date and modern design.
If you happen to be overseas and are considering investing in the ever-changing British economy, then this might be a great option for you.
This type of investment is typically a more hands-free route because there will always be an influx of students year on year needing someplace to live and most of these properties are typically managed by a service company.
Seemingly, it is so popular amongst overseas investors that 70% of student property investors are internationally based.
As previously mentioned, before deciding to invest anywhere; rental yields have the potential to sway any investor on their quest.
However, if you are not completely sold on student property investment, then you might want to know that rental yields with student property in the UK are usually high.
If you take the example of a studio apartment, this is just one unit and so it can be purchased for a cheaper price than a 4-bed residential property.
However, the lower price has no effect on rental prices which remain consistently high especially amongst the more luxury accommodations causing the yields to often reach as high as 8% in certain locations.
Important Note: Although rental yields in PBSA investments can be some of the highest available, you don’t usually get the highest capital appreciation.
This is because PBSA properties are more difficult to sell and are usually sold to another investor.
5. Diversify your property portfolio to minimise risk
With every investment comes an element of risk. Unfortunately, the two are a package deal.
As mentioned in tip #1, to nullify the impact of any changes to the market the wisest option is to diversify your investment; this can be done in a number of ways.
The wisest and most obvious decision you can make is to invest your money in multiple properties instead of one.
This is because having interest in multiple assets puts you in the best position to mitigate against risk while simultaneously increasing the likelihood of your property portfolio rising in value.
In the event of any one investment taking a negative turn, the impact of this will be considerably less because of the support of your other assets.
Another way to diversify your portfolio is to invest in a wide variety of locations.
When starting your path into the big scary world of property; it can be easy to fall into the trap of investing close to home in the same area you live in.
While this may make sense because you have the advantage of a real insight into the region, you are vastly limiting yourself to a huge market waiting to be had.
Big cities like Liverpool and Manchester make great investments because the property and rent prices are high and are likely to keep increasing.
There are so many more different cities and regions to choose from; each with their own price brackets and levels of growth. It is up to you to conduct research and expose your portfolio to a different type of market.
The important point to focus on is that all markets face periods of growth and downturns.
Take London for example: for many years the city saw a huge rise in demand and investment which caused the value of properties to inflate so rapidly.
Today, tenants simply cannot afford the extortionate rental prices that London demands.
Property investors who invested in the South are now facing difficulty in finding tenants who are now choosing to move further North to live in better quality and more affordable property.
6. Understand the risks involved
Now that you have an idea as to how to manage risk, it seems necessary to identify and be aware of the types of risk needing to be managed.
The property market is currently growing at a steady level but needless to say that this growth has and will fluctuate.
From time to time, many properties will face periods of value depreciation from political and economic outcomes. When this becomes an issue is if the value drops so much that Debt Gearing becomes a real prospect to you as the homeowner.
This is where the difference between the debts owed on a property are more than the equity within the investment. Managing your debt gearing risks can partly be done through avoiding the temptation to over borrow on a mortgage.
Another risk in residential property is that your buy-to-let property could have void periods and so action will need to be taken to prepare for this.
If there are no tenants to pay rent, then you will be left to pay the mortgage repayments out of your own income which will prove to be difficult the longer it takes to fill the tenancy.
A property unable to find tenants can be due to a lack of suitable tenants, or not enough rental demand in the chosen area.
However, this risk is one which can be managed either by researching vacancy rates before purchasing within a specific location or simply setting funds aside for an unexpected vacancy.
Property is an asset that periodically needs servicing. So, when you receive that phone call about a leaking ceiling, there needs to be a financial buffer in place so that you’re not left living off Tesco Meal Deals until the end of the month.
Without an offset account, you are setting yourself up to fail financially thus without an income, you will not be able to hold on to your properties.
To best gage how much should be set aside for repairs and maintenance; you should estimate how much it might cost to replace the ‘big ticket’ items throughout the property, e.g. boilers, dishwashers, carpet. It would be advised to identify the current age and life expectancy of these items to plan accordingly for the next 5 years.
Another potential issue with investing in property is the limited liquidity. If you had some unexpected changes to your personal circumstances and needed a big influx of cash quick, then selling a property to raise this cash might take longer than you expect.
Investing in property is nothing like investing in stocks and shares where you can dip in and out at a set price, instead you will need to find a buyer which in itself, can be a long process.
Then if you are successful in agreeing a fee, you also have to sit through the exchange period.
This is why it’s important as a landlord to have extra capital kept away for any surprise occurrences that may arise.
7. Carry out extensive due diligence
This process is always going to be time-consuming and at times, expensive. But there are thousands of investors out there who wish they had been more vigilant and now face years of debt.
As mentioned earlier, one of the most important ways to assess an investment property for sale is the location of the property.
An online search is usually sufficient, but if you are capable of doing so, pay the property a visit and study the neighbouring properties in that area.
This should help you determine how in demand this property will be. The features that make up the most desirable locations are ones with high rental yields, capital gains growth, tenant demand, and any potential redevelopment policies underway.
Researching where the highest rental yields are is crucial to your investment strategy. All of these features are why many investors are moving from the South and are looking to invest with the Northern powerhouses.
You should also research into your developers and gain an insight into their track-record. You can do this quite easily by looking through their website and identifying how many previous finished developments they have to their name.
You can also go one step further and look on the Companies House website to scan their filing history and directors. Some directors might have dark and hidden backgrounds in former ventures that have failed.
Another way to conduct due diligence is by browsing through news articles.
You might be surprised to find negative news stories about the location or property developer.
The location might have recent negative connotations to it which could dismay potential tenants from living in that region making it harder to fill your property and longer for you to start gaining rental income.
You should also check Google reviews and/or Trustpilot for testimonies about the developer in question. You will likely find previous investors who have come to vent their anger about a development that went wrong.
On the other hand, you may find a majority of investors who have nothing but good things to say about them.
If you don’t have the time nor energy to conduct thorough due diligence, there are companies that exist who will do all of this for you in exchange for a fee.
Alternatively, an Elavace property expert can carry out the due diligence for you at no cost.
Being a member of Elavace means that your best interests become our best interests, which is why due diligence is intrinsic to all of our clients’ investments.
Elavace will only conduct business with the finest of developers. To ensure they maintain our high standards, we take it upon ourselves to issue frequent questionnaires and background checks.
Another part of the due diligence we carry out is the capability of our clients to meet the financial commitments to fulfil the property investment, if you haven’t already done that yourself.
Take a look at our Google reviews to find out more about our successful track record with clients.
8. Always have a clear exit strategy
Whether or not you are looking to enter the property market for a rental income or capital gains return, an exit strategy is always necessary for any investor.
But what exactly is an ‘exit strategy’ and why is it so important?
An exit strategy is a plan for when investors decide to part ways with their property investment to ensure the process of selling their Buy-to-Let property is as smooth as possible.
This is considered essential in terms of maximising the profit made from your venture through selling at the right time.
There are various key questions you need to ask yourself when deciding on an exit strategy, which include:
- What is my risk level?
- How long do I intend to invest for?
- What is the lowest price point I am willing to sell for?
- What level of profit am I looking to make over the investment period, and will I sell once I reach it?
As mentioned, there are different types of exit strategy and hopefully, using the key elements stated above will help choose one that is perfect for you and your goals.
One of our experts can offer you a free consultation and discuss your investment goals to come up with a strategy for making the most money from your property portfolio.
9. Consider how you should invest: mortgage or cash
So, you have decided you want to invest in property but now comes the next stage of where and how exactly you should raise your money, which is no picnic for any buyer.
In order to gain the best and most personalised advice, you should arrange to visit a professional who works by accordance to your needs, wants, circumstances and objectives to best advice on products best for you.
It would be worth paying a visit to a Mortgage Broker or a property consultant who will be able to do all of this while answering any other queries you might have.
Financing a property doesn’t necessarily mean you have to get a loan from the bank. If you are capable of saving and can pay for a property or multiple properties outright with your own single cash pot, this will save you thousands of pounds in mortgage interest costs.
This might not be the only instance in which a traditional mortgage is not required. There is also the option of a joint venture.
A joint venture is an arrangement whereby the equity and ownership of the asset is shared between a group of investors, which also means the risk of the asset is also shared.
A popular case of a joint venture is where a partnership is formed amongst investors which would speed up saving for the next deposit, while also providing the ability to increase income and scale the portfolio faster.
Partners in joint ventures don’t always have to be individual investors They can also be large institutions like banks, lenders and property investment trusts.
If you are a big money investor, or represent a big investment company, and are considering a commercial investment, it is common for these types of institutions to settle an agreement where capital is given as an exchange for part-ownership of the asset as opposed to a loan.
However, for the vast majority of property investors, a mortgage loan is the most realistic source of finance.
Over 95,000 mortgages were approved by the biggest banks in 2019, so there’s no point in even trying to play the banks because these are highly experienced lenders who will always be one step ahead of you.
Aside from the interest rates payable, this is the wisest option to fund a property purchase because the banks have rules and regulations to follow and will offer a product based off of your needs and personal circumstances.
10. Network with other investors
If you want to join the pool of other investors across the UK, then it is worth browsing your social media like Facebook or LinkedIn where there are lots of property investing groups for you to discover.
Property networking can be beneficial to you as an investor because:
- It can enable you to find new investment opportunities potentially before any other investors, and also gives you the ability to sell without the expense of an estate agent. Whilst there might be investors advertising upcoming properties for sale, there may also be some investors advertising the possibility of a joint venture so keep your ears open!
- These groups/pages will also have multiple discussion points amongst likeminded investors which means you can gain real insights into the market. To take that one step further, if you are considering purchasing a property within a less familiar geographic location, a quick post in a page such as these could equip you with multiple insights to better gage the location before investing.
You may also want to try attending property networking events either in your local area or in an area where you are considering investing.
Sometimes, great investment alliances are struck up at networking events, and you’ll likely gain knowledge from experienced investors who have stories to share.
11. Are you investing for capital growth or regular income?
As an investor, you definitely need to understand the difference between capital growth and rental yields.
These are the two ways you will make money as an investor and so understanding these will help you decide what kind of property you are in the market for.
However, choosing which type of return you want entirely depends on your own personal investment goals.
As previously mentioned, your own personal circumstances are the biggest factor in the type of return you are looking to make.
Where a rental yield investment becomes more desirable is if there are regular mortgage repayments which need paying, and so a rental income can help support this and more often than not, will leave some cash left over as additional income.
The type of property that best fits this type of investment is a buy-to-let property. Perhaps near to a city centre where they will always be in demand.
Capital growth is essentially the profit made from selling a property. From the time you invested to the time you sell, the value gained is called capital appreciation.
The value of your property won’t grow overnight. If high capital grow this they type of investment you are looking to make, then you will need to establish a realistic timeframe of 5+ years before you consider selling.
If there are cash reserves at your disposal then the option of a capital growth property might make more sense.
For this type of investment, location is especially important because you will need to conduct research into the local marketplace and the patterns in certain properties appreciating in value.
Investors seeking properties for capital appreciation will often choose off-plan developments so they can purchase the property at a discounted price so once the building is ready, the value has already grown.
This is an easier type of purchase because it might take months/years before you have anything to do.
Sometimes, it’s possible to strike lucky and purchase a tenanted property that also gains a high level of capital appreciation. In which case, both regular income and capital growth are realised.
12. Fully managed or hands-on investments
A decision many investors need to face is whether or not they want the hands-on or hands-off approach when managing their investment.
This is another decision which is heavily influenced by the personal circumstances of the investor. A big factor to consider is that managing a property portfolio yourself can be very time-consuming. Many investors, particularly full-time professionals, find that the responsibilities are too much to handle alone.
This is because being a landlord means you are bound by a long list of legal obligations which you must follow in the best interests of your tenants.
You will also need to manage tenant checks, day to day maintenance problems, logging deposits, and much more.
But not all investors are put off by the extra responsibilities of being a landlord. Some investors really enjoy the work, and extra income, that comes with it.
In essence, your tenants will pay you rent every month in exchange for a home which meets their requirements and is suitable to live in at all times.
On the other hand, if you happen to be an investor with little time to spare or incapable of managing the responsibilities from overseas, then the hands-off approach might be best for you.
In the case of an overseas investor, we at Elavace are trained and equipped with the skills and experience to consult you on a property investment suitable for your time restraints.
We have a portfolio of off plan and ready-made developments that would require next to none of your time while they are being built. Upon completion we can manage your property for you via our sister company, Elavace Estates, who offer affordable and reliable property management services.
Another option for an investor wanting a property with as minimal responsibilities as possible is a care-home investment, which would be managed solely by the care-provider.
With both of these investments, the only concern you have is reaping the lucrative benefits!
Don’t be fooled into thinking that its either one or the other here. You can always opt to have some responsibility which you may believe is possible to do to the best of your ability and leave the ‘nitty-gritty’ jobs for us at Elavace.
If you are looking to get a buy-to-let property in your local area and have the resources and knowhow to manage the maintenance yourself and handle the tenants, then this would be a wise choice to make.
We can help in providing bespoke services; tenancy credit checks and rent collection are some of the individual services we offer to help with.
13. Learn the laws of the land
As mentioned previously, you as a landlord have responsibilities to follow in the best interests of your tenants.
Obviously, we’re not here to scare you from investing in property but simply offer you an insight to all aspects of property investment.
Try not to be put off by what seems like a long list of responsibilities. After all, this will convince your tenants to stay for longer and will reduce any void periods.
Not just that, but you may be on the other end of the exchange some day and need to know what you deserve as a paying tenant.
There is a long list of necessary legal obligations, so let’s dive right in.
First of all, the safety of your inhabitants. Gas safety of a property must be inspected by a “Gas Safe” registered engineer, a warranted certificate costing £75 will be issued to you which you should present a copy of to your tenants before they move into the property.
Next is Fire Safety. According to the law, there should be at least one smoke alarm installed on every storey of the rental property. If there are any rooms where solid fuel appliances are contained, then there must also be a carbon monoxide alarm fitted.
There are many more requirements that you should know about, particularly if you’re planning on managing your properties yourself. These include:
- Fire Resistant furniture
- Repairs and Maintenance
- Safe to use electrical equipment
- Tenancy Deposit secured into a Tenancy Deposit Protection (TDP) scheme
- Rental Income Tax
- Energy Performance Certificate (EPC)
- Landlord Licensing
- The tenants Right-To-Rent
- General Data Protection Regulation (GDPR)
- Assess risks for Legionella bacteria
- Abide by the Tenants Fees Act 2019
If you wish to look into your tenants and your own statutory rights, then you should have a read through the Housing Act 1988. Giving this a read may also resolve any sleeping difficulties you might be suffering with.
I understand that this may be confusing and somewhat off-putting. This is why our sister company, Elavace estates, have experienced property experts who can manage your rental properties for you, so you don’t need to worry about any of the legal obligations yourself.
14. Look for the highest rental yields
If you are in the market for a property that can generate a positive rental income, then you definitely need to know what rental yields are and which locations have the best yields.
If you have found a property that you like, the next step is to look on property listing sites like Zoopla to find out how much properties of the same description in that specific area cost to rent.
Then multiply this figure by 12 (the number of months per year), this answer should then be divided by the value of the property.
The rental yield is a percentage value so you must remember to multiple by 100.
One of the areas which we specialise in is Liverpool, and the most popular venture for investment is the L1 region.
Taking this case, if you were in the market for a simple one-bedroom apartment fetching for around £700/month, you would multiple this by 12 which means the annual rental income is £8400.
The average price of a one-bedroom apartment in this region is £100,000. The calculation should then be “8400/100,000 X 100” which should equal to 8.4%.
Anywhere between 5-8% is considered a good rental yield. Thus, this would be a good investment to make.
Its best to ask your personal property consultant of the best locations for rental yields when deciding where to invest in Buy-to-Let property.
If you prefer to tackle this investment yourself, then there are subscription services available online like propertydata.co.uk which compile nationwide and local property data to help you make data-driven residential property decisions.
However, the market is a lot broader and our consultants can offer the most up to date and relevant data to help you make better investment decisions.
15. Don’t spend thousands on a property education from “experts”
There are lots of experts in the property market who will likely charge an arm and a leg for “guaranteed money” advice on property investment.
It’s best to steer clear of them: particularly if they’re promising “no-money-down investments”.
“No-money-down” investments require you going into deep debt to pay for the property in the hope that a tenant will pay the bills.
However if you can’t find a tenant, you’re stuck with the bill, and that doesn’t sound like “no-money-down” to me!
These days, we have the ability to use the internet which gives us unlimited access to information at the reach of our fingertips.
The input you would receive from paid expert can often be found online, for free, such as this article developed to set you up on your venture.
There are sites online which will find and show different types of data to help you understand the markets you will be entering and how profitable your investment will be.
If you have conducted all the research you need but feel you need a second opinion, there is always the option of social media networking as mentioned previously in the article.
These are filled with experienced property investors who are more than willing to offer advice based on their own experiences.
16. Take other fees into account before investing
When you are investing in a property, you need to record exactly how much your outgoings are to best deter how profitable the investment will be and to ensure you avoid any shortcomings.
This might seem obvious but missing just one fee has the potential to be disastrous on your investment journey before it has even begun.
Even though you are not planning on living in the property you are purchasing, it may still need furnishing for your tenants.
There is also the potential for huge maintenance costs within the property so it is wise to check the age/state of items like the boiler and roofing, to then gauge when these will need to be paid and how much it will cost.
Put it this way, an unexpected broken boiler would cause you to operate at a loss for some time.
There is also an extra stamp duty charge payable for buy-to-let investors. Did you know that you will be required to pay an extra 3% in stamp duty on any property you own other than your place of residence?
This means the cost of purchasing a property will be higher.
There may also be additional capital gains tax when the property is sold that, if you forget to margin into your accounts, could affect the profitability of your investment.
Another cost that you might need to pay for is landlord licensing fees. However, this one depends on the local council’s requirements of where you are purchasing.
17. Consider hiring a property management company
The financial benefit of property investment can be immeasurable in the long run, but many investors can stumble at the first, second or third hurdle before they achieve any real success.
The three big assets that are fundamental to any investor to succeed in a property venture are investment, time, and energy.
If you as an investor believe you are incapable of bringing all of these to the table, it would be wise to consider some assistance from a property management company.
Pricing the rent of a property may seem as simple as a quick check of the rates on similar properties on the market.
Actually, there is significantly more to it than that!
There needs to be a balance between earning as much as possible while also ensuring that the vacancy rate is as low as possible.
We at Elavace have substantial experience and knowledge in local rental rates and have the resources to conduct thorough research into any local market you are looking to invest in.
A key element to our management service is efficiency. One way in maximising efficiency is through maintaining a stable income for our clients by finding quality tenants that will stay for the longest possible period.
We will also ensure that any maintenance and repairs are diagnosed and resolved on time which will help you avoid spending big in the long run.
Finding tenants is something that doesn’t need to be rushed and should be done in a thorough manner. However, this can cause the process to become exhausting and highly time consuming.
If you don’t have the time and energy to go through interviewing and conducting background checks on your tenants, that’s where we come in. Remember, the biggest mistake you can make is choosing problematic tenants to inhabit your property.
As many as 90% of tenants are found online, and with Elavace at your service, you will have the best functioning online capabilities on your side.
In another tip, we mentioned the benefits of hands on/hands off property investment. The hassle of day-to-day tasks can often prove to be all too difficult for investors to handle.
If the hours in your day are largely taken up by a full-time job and other time constraints, then having a partner in Elavace means you can leave the ‘nitty-gritty’ stuff to us.
This covers a whole array of tasks like scheduling inspections, rent collection, and maintenance repairs.
Having read these tips to investment, you will now be conscious of the legislation involved when purchasing and owning a property. You will already be aware that laws are always being updated, and if you aren’t one for scanning the web for regulation changes, then not to worry, you're part of a whole pool of investors in the same boat!
However, not being up to date with landlord law could cost you fortunes in legal fees. This is the biggest and most important reason why you should consider the assistance of Elavace. As we can ensure you are on top of the law at all times.
18. Carefully consider your options—don’t go straight for the first investment you find
There are various strategies to entering the property market that will maximise the profitability of your venture.
No matter how perfect the property may appear, you should always carefully consider different options.
You might have decided on a brand-new 2-bed property which is showing all the right signals. However, it may still be possible to generate a better return from the same amount you plan to invest.
A city you might have looked into investing in for its fast-growing economy is the Northern Powerhouse city, Liverpool which boasts consistent returns on all ranges of property investment.
If you are looking to spend in the region of around £200,000, you need to consider whether you want to invest it in one property or a number of properties, generating higher income.
For example, market research will tell you that 1-bedroom flats within the L2 region of Liverpool have rental yields as high as 7.8% and cost on average £100,000.
A 2-bed flat in the same area costing £160,000 offers just over 5%rental yields so they are considerably less profitable.
It would make much more financial sense to spread your investment and purchase two 1-bedroom flats as the rental income would prove to be far greater than one 2-bedroom flat.
Our consultants can help you identify investment property opportunities like this.
19. Get a dedicated property investment expert
Hopefully by now you understand a lot more about property investment and can use this newfound knowledge to gain a head-start in an exciting new venture!
The information in this article should help you decide whether investing in property is the right path for you.
If you are interested, then the next important step is to discuss your goals and circumstances with a property investment expert who can formulate a course of action suitable to you.
Our job at Elavace is to provide our clients with the best property investment opportunities on the market that are in line with their budget and goals.
At this early stage, it is natural to have a million questions and concerns. This is why Elavace property specialists will work to provide clients clarity before, during and after their investment.
Remember, we are on your side, and so we will help you to decide whether this is the right choice of investment with your money.
Once you understand the investing process in more detail, together with Elavace we will decide on an investment strategy that works for you and commence tours of the property site and area of the investment.
This is the most important stage of the process which is why our team will work together to provide you with the best possible assistance and guidance every step of the way.
After this, our specialists will never leave your side until you are completely satisfied with the investment you have chosen.
20. Always reference check your tenants
Before handing over the keys to a property, it is paramount for a thorough screening to be conducted on all prospective tenants. Speeding through finding a new tenant can often create a recurring headache for landlords throughout the tenancy – that explains why as many as 92% of UK landlords reference their tenants! The process of tenant referencing is to effectively ensure that your tenants are not only able to pay their rent but are also suitable to live at that property.
There are a wide variety of ways to do this. The single most effective and common method is to request a tenant reference from any previous landlords. Put it this way, when somebody applies for a job, they usually provide references for the employer to review. Just as if a tenant applies to live in a property, it should be of no concern for them to provide you with their references. This assessment should run through the tenant’s background, therefore as well as references, the tenants should also provide some of their personal information like bank details for credit checks, their current employers details, and proof of address and identity.
A credit check will help gauge whether the tenant will be able to consistently pay rent on time, which is priority for you, especially if you have a mortgage to pay. If you wish to be thorough during the referencing, there are many more checks to consider: Right to Rent check, fraud checks, outstanding debt search, or affordability ratings. This may seem like an ear-ache for those full-time investors and if so, the services of an experienced property manager would be advised – but we’ll get to that shortly!
21. Keep emotions out of the process
Property investment can be an emotional rollercoaster even at the best of times. Unfortunately, emotion has proven itself time and time again to be the biggest downfall for property investors. Any budding property investors who begin their takeover of the property market awash with emotions often become blind sighted into making poor decisions.
This tends to happen during the initial search for an investment property - never forget why you are scanning through Zoopla or Rightmove in the first place! It is easy to be swept away with the thrill of investing in a new property and how tempting it can be to transform this into your own ideal home. The issue with falling into this trap is that your tastes aren’t likely to be the same as that of the person who is going to be living in the property.
If you find yourself torn between a property based within a city such as Liverpool where demand for rentals is higher than ever, or a rural detached house with a cool swimming pool - it’s time to take a step back. It is so easy to become emotionally invested in a property to the point at which your whole investment strategy has been compromised.