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Beginner’s Guide to Investing in Property

Investing in property is one of the most popular ways to invest long-term. In fact, property is one of the four most common types of investments, alongside shares, bonds and cash. Property investment can take many forms but this guide covers the tips you need to help you secure your first buy-to-let property.

Research the market

If you are new to buy-to-let, then you need to take some time to understand the housing market and that means being prepared for the financial risks, as well as the financial rewards. When you invest in buy-to-let, it means committing tens of thousands of pounds to a deposit and taking out a mortgage.

You need to go into property investment with your eyes wide open. Take the opportunity to speak to others who have invested in buy-to-let property and learn about their experiences – warts and all.

Location Location Location

When it comes to buying or renting a property, it’s all about location, location, location. You want to choose an area with promise and that doesn’t necessarily mean you need to choose a wealthy area or a poor area. You need to find a place where people want to live.

Look out for schools, transport, access to motorways, jobs. You need to match the type of property you can afford with the people in the area. There is no use buying a student property if it’s miles away from the University.

A good tip is to research your competition using websites like Right Move. You will also be able to find out the going rate for certain areas.

Do the maths

Don’t get too carried away by the excitement of capital gain. You need to crunch some numbers first. Before you view a potential property, write down its cost and calculate its rental yield. Buy to let lenders usually require a deposit up to 30% of the value of the property and the rental income should cover 125% of the mortgage repayments.

You should also have a contingency plan in place, in the event that an urgent repair is needed or the property is empty for a few months.

Shop around

Banks and building societies are not the only places to secure a buy-to-let mortgage. It would be a good idea to speak to an independent and dedicated buy-to-let mortgage broker when you are looking. They can tell you what deals are available and help you decide which one might work the best for you.

Put yourself in their shoes

One of the risks of buy-to-let investment is envisioning yourself living in the property. You need to remember that you are not the tenant and instead, put yourself in their shoes. What are they looking for? This is what you need to offer them.

For instance, students need something simple, comfortable and cheap, whereas families may want a blank canvas; a place where they can put their own stamp on and bring up young children. On the other hand, young professionals might a stylish, open-plan space to entertain friends.

Don’t get your hopes up

Property investment is a long-term option so don’t expect to be a millionaire overnight! Focus on growing your rent over time. This will allow you to find further investment projects.

Get a good deal

You are not relying on selling a property, in order to purchase a new home. As such, you represent less of a risk of a sale falling through and it puts you in good stead to negotiate a discount. A landlord who is looking for a quick sale may be more willing to accept a lower cash offer.

Hands-on or hands-off?

Buying a property is only the first step. Once it has been bought, you need to deal with enquiries, collect payments and of course, find your tenants. This is entirely possible to do but may be harder if you are managing a full-time job at the same time. Therefore, you need to consider whether you want to hand over the management of the property over to an agent or spend your early mornings, late evenings and weekends at the buy-to-let property. Independent agents can offer a very personal and tailored service. For a percentage of your profits, they will deal with all of the problems for you. They will even have relationships with local tradespeople should any repairs be needed.

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