Investing in property can be highly lucrative – provided you exercise good judgement! Read on for our guide on the where, why and how of making a property investment.
What are the benefits and risks of investing in property?
There are many benefits to investing in property.
Buying a house for a low price, renovating it and selling it is a good way to make money if you’re skilled in interior decorating and diy; a rental investment can provide you with a steady source of income and property investments can also be made with a dual purpose – as a holiday home for a few weeks a year, then rented for the rest of the summer to provide an income..
However, when considering making a property investment it is wise to consider the risks of your decision as well as the benefits. Like any investment, property can cause losses as well as gains, so be careful.
In order to reduce the risk as much as possible, calculate all expenses and profits before making any kind of commitment. If in doubt, overestimate your expenses and make sure to factor in your down payment, which is likely to be at least 20%.
Keep your investment as low as possible and don’t underestimate the costs of renovating a property – these must be factored into the equation. Even if you are sensible and choose a low cost home, a property is a serious financial commitment. For this reason it is highly advisable to have cleared all your outstanding debts before embarking on any kind of real estate investment.
Investing in property: choosing a location
So you’ve weighed up the benefits and risks and decided that a property investment is right for you. The next step is to choose a location in which to make that property investment. It is a universal truth that location is essential in the property market. The position of a house or flat can mean the difference between an excellent investment and making a loss.
You may already know where you want to invest. This is especially true for those investing in a second property – you may have set your heart on a holiday home in a specific place. In this case it is likely that you have a good idea of your requirements as well as the market – how much property costs, what sells and what doesn’t.
Once you have decided on a city, town or village, then take a look at the location of the property on a smaller scale. The neighbourhood, the street, the proximity to amenities. If you’re purchasing a property that you intend to rent, think about who you’re going to be renting it to and make sure that the house or flat caters to their needs.
If your prospective tenants are a family, ask yourself if the property is in a nice neighbourhood with close proximity to good schools. On the other hand, if you’re renting to young professionals in an urban environment, take a look at the transport links and amenities available. Then, finally, think about the specific qualities of the property itself. A garden may be crucial to a family or a retired couple, but less so to a younger tenant.
Whether the property is purely an investment or you intend to use it yourself for part of the year, it is imperative that you carry out substantial research. Do not make decisions with your heart. Be prepared to redecorate in a style that will attract prospective tenants and buyers, rather than your personal preference, and to pass over properties that you would prefer in favour of a more viable option. Remember – this isn’t your home. It’s an investment.