Things to Consider Before Investing in Property
by Mashum Mollah Real Estate 12 December 2018
Investing in property is a very enticing opportunity for those wanting to make two different forms of investment, with the property being the only asset that produces returns in two ways – from rental returns and capital appreciation. Being a landlord or investor is incredibly rewarding and can be extremely prosperous, providing you consider all eventualities before investing.
Consider any unexpected situations that may arise:
There are numerous websites that aim to aid any of your financial woes as well as prompting considerations you should consider when embarking on a property venture. Factoring in every element from mortgage costs, deposits, legal fees, and stamp duty is important and helps you prepare for any hidden costs or those you haven’t budgeted for.
Of course, becoming an investor has associated risks, but often risks can be prevented before they arise. Devising a financial strategy can help to work out what you can afford after the initial investment is made. You’ll need to plan a budget for situations where you may be without rental income, for instance during void periods between tenants. Sometimes, particularly within student accommodation investments, you may face a situation where the tenant has insufficient funds and is, therefore, unable to afford the rent. This results in unplanned legal costs, which could have been avoided if you had opted for insurance which may mitigate risk by covering missed rental payments.
Renovations and maintenance can also place a severe strain on your profits, as essential repairs must be carried out to create a safe and presentable living for potential tenants.
Who is your ideal tenant?
One of the most important decisions is who you would like to live in your property, and how long you are going to rent it out for. Researching your local area may help to provide guidance as you will be able to determine how strong the tenant demand is, as well as being made aware of the types of people in the area, whether that be young professionals, graduates or families. As soon as you have established who your ideal tenants are, you can begin to formulate potential rental costs.
If you research the wider market, it can help outline whether your location exceeds the national averages in cost and property prices or whether it sits below, therefore allowing you to charge less. Data from the HomeLet Rental Index highlights an insight into the market across the region, and allows full details on market performance and where the best locations for investment are.
What location will be the most profitable?
Each location offers different selling points so before you set your sights on one location, it is important to consider what amenities the area has and how these may benefit your target tenant. RW Invest property specialists, offer both student and residential investments that are located amongst some of the most desirable postcodes across the UK. Students may want to live central to a library or live in proximity to local bars and restaurants, whilst professionals commuting a long distance for work may need convenient access to cross-country train routes and easy motorway access.
Amenities aren’t the only point of consideration as ultimately in an investment the major pull would be the possible returns within the area. Rental yields in the North are currently stronger than those found near the capital and properties in the South are suffering due to escalating prices that make sourcing and obtaining a property near enough impossible, particularly for first-time buyers.
While you may have a location in mind, weigh up the pros and cons to ensure it is right for you. Research the local market and put yourself in the shoes of your prospective tenant to further understand their needs.
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