Whether you are a first-time buyer or an experienced investor, your goal is to profit from the investment. Before this can be achieved, however, there are many factors to be looked into, to ensure that your target is met. As mentioned in one business magazine, “If you fail to plan, you plan to fail, and that is certainly the case with real estate.”
The research will have to be carried out and, to help decide on the best investment, especially if it is in the upcoming area of South East England, the expertise of estate agents in Sittingbourne will go a long way in assisting you.
Some of the details to be looked into are listed below:
Budget: Before you look at the property to invest in, you will need to work out a budget. How much can you afford to spend? You will need a capital amount for the deposit and calculations to need to be done on how much you will require to spend on mortgage payments, etc. However, there are now investment platforms and REITs (Real Estate Investment Trusts) which you can join with other investors in a larger property, with a smaller deposit.
Type of investment: Property investment does not necessarily mean buying a property. There are no alternative means to invest:
- Property ISAs (allow you to invest in property without paying tax on returns)
- Property crowdfunding: (owning a share of a single property with a group of people)
- Property bond or loan notes: (investing in a property company which sometimes provides good returns)
- Property unit trusts: (they hold, manage and maintain property portfolios for investment purposes).
Depending on your circumstances, you can decide whether to buy a property or invest in any of the platforms available.
Residential Property for investment: Should you opt to buy a property, you should research which type will be the most feasible.
- Buy-to-let: For long term investment, buying and renting the property usually results in a good income and generates capital growth. With Generation Rent popular, the rental market is doing well.
- Property development: For short term investment, investors can renovate or make improvements to the property and then sell it at a higher price. Below market value properties are ideal for refurbishment and then sale. The demand for renovated homes is rising.
- New Build flipping: It is another option where investors buy property while the construction is still underway and then sell it once it is completed. New builds usually have upgraded facets, fewer maintenance costs and conformity with the regulations required.
Location: The property does not need to be where you want to live. Research should be done to locate the best spots to buy property, where the ROI (return on investment) will be the highest. Regenerated cities, like those in South East England, offer additional amenities for residential and commercial properties. Transport networks are being upgraded and reprocessing public areas to conform to safety protocols are being undertaken.
Demand: If looking at buy-to-let, the higher the property price does not necessarily mean a high rent. Quoting from one expert, “Double the price does not mean double the rent”. One way to check the feasibility is to research property prices in an area using a property portal to find out the selling price of suitable houses. Then check “room wanted” advertisements in that area, to find out if there is a high demand and the price people are willing to pay to rent there. Comparing these details in more expensive areas with cheaper areas will give you an idea of the demand and the expected income.
Type of property: Depending on your budget, the type of property in the location needs to be studied. If in a suburban area, larger houses with open spaces will be more appealing to families. A compact apartment in a city may have a higher demand for rental, especially for students, if there are universities close by. Ongoing maintenance costs should be calculated and compared with the expected rental income, to decide whether to invest in a house or apartment. The age of the property is important. An older property may need higher maintenance, but if it is in good condition, this may not be the case. Everything should be thoroughly checked – building inspection of the structure to fittings, fixtures, energy performance norms and pest control. Additional features like natural light, ventilation, a garage or an additional bathroom could add to the appeal.
The 1% rule: Under this “real estate rule”, the income each month should be at least 1% of the total price paid for the property, including renovation and repair costs. This helps investors decide whether a particular property is worth the investment.
Conclusion: The UK property market has always been a good source of investment. As with most decisions, there is a risk involved. Research and calculations need to be carefully considered, including tax benefits, before the best investment is made. However, once the above tips are explored, we are sure that you will hit on the right button!