The Importance of Planning
Investing in property really can provide the lifestyle you desire. PwC has forecast that 1 in 4 homes in the UK will be in the private rented sector by 2025. With more than a million extra households expected to be renting in 2025 compared to today, the demand for rental property could turn your goals into reality. However, you must be prepared. Here are some of the most important things to plan before investing in a property.
Location: Where will you invest?
Buy a property in an attractive location for investment, where people want to live. Invest where there are good shops, recreation facilities, and schools. People don’t want to travel far to buy food or go out for an evening meal or drink with friends. Families want to live where their children will receive the best education.
Transport links, should be considered too, which make commuting to work much easier. And, talking about work, invest where there are plenty of work opportunities provided by several major employers – this will help a family to earn a second income.
Finally, invest where there is major investment committed – regeneration and infrastructure spend is key to the longevity of investment potential.
Financing: How will you finance your investment?
Consider how much deposit you need to raise, and how to raise it. Perhaps you’ve received a bonus from work, or an inheritance. Maybe you have a large amount of equity in your home. Is that cash in the bank, or sitting idle as home equity, producing the returns that will give you the lifestyle you deserve?
Team Up - What partners do you need to be successful in property investment?
Choose your investment team wisely. Think about the skills you have and the skills you are short of to ensure profitable investment. For example:
Make property investment research
Partner with successful property investors
Choose the best mortgage brokers
Make sure you choose an experienced solicitor in a buy-to-let field
Managing - Who will manage your investment property?
Do you really want to manage the property yourself? Are you tough enough to chase late-paying tenants? Do you have a network of maintenance workers to carry out repairs? Are you ready for those midnight calls from tenants complaining about a dripping tap?
Think about your objectives, and if they include being a DIY landlord. If they don’t (and mine never have), then you’ll need to hire a good investment property manager to look after your properties
Research - Know your target tenant
Who will you rent to? This will make a difference to the type of property you buy, and how you furnish it.
Profit - Always consider the ROI
To unlock your lifestyle goals, your investment property must provide a return on investment (ROI). Don’t invest emotionally, when you have fallen in love with a property yourself. You won’t be living in it.
Consider the rental income it could produce, and accurately assess investment property expenses to avoid cash flow problems.
Consider your financial objectives, and whether they will be best served by investing for income or capital growth.
Readiness - Be prepared for the worst
Nothing worth doing is ever plain sailing all the way. There will be times when your investment property frustrates you. Understand that you will suffer void periods, for example, when between tenancies. Tenants may pay rent late. A water pipe may burst.
If you are prepared for the worst, you’ll breeze through these frustrations. The best way to do so is:
Credit: London and UK Property Investment Blog: Brett Alegre-Wood
Images: CTTO Google