How to Invest in Property?

 
So you’ve decided you want to invest in property. When thinking about how to invest in property, the best place to start is setting your goals and getting your finances in order.

Below we explore how you can prepare for your investment and how you can make it happen.

Research Your Property Investment Options

Property investment can be done in a variety of ways, particularly in a market as diverse as the UK.

You might decide to turn your home into a Buy-to-Let property, you might decide to buy an additional property or even invest in a Real Estate Investment Trust.

The most common types of property investment that you could go for include:

REITs

Real Estate Investment Trusts are essentially investment funds that solely invest in property.

If you’re not in a position to make a cash investment or have the money for a deposit, a REIT can be more accessible. As a pooled fund, it’s easier to get in and out of as your essentially buying property with other investors.

Returns are paid based on the rental income that is generated, which is then shared with the other investors.

You can read more about REITS specifically here.

 

Traditional Buy-to-Let Investments

Probably the most common property investment is a Buy-to-Let investment, where an investor buys a house or apartment and lets it out to tenants.

While this requires having the money to either put down a deposit or buy the property outright, it’s still relatively accessible as an investment due to it being fundamentally straightforward.

You can read more about Buy-to-Let investments specifically here.

Off-Plan Investments

Off-Plan investment is essentially the same as Buy-to-Let investment but you purchase the property before it has been completed.

As an asset, Off-Plan property does offer some unique benefits, primarily around building capital growth during the build.

If the area surrounding your investment grows in value, you’ll see the benefits.

You can read more about Off-Plan Investment specifically here.

 

Investing in Property Overseas

If you’re an international investor, UK property represents an excellent way of securing a relatively reliable asset in a stable market.

While investing in UK property from overseas comes with some caveats, it’s popular with investors in countries such as the UAE, Hong Kong and South Africa that are looking to diversify their portfolios.

You can read more about overseas investments specifically here.

Download the Ultimate Guide to Being a Landlord

 
There’s a lot of information that goes into a property investment. If you’re looking for all of that information in one place, this one’s for you.

Download the ‘Ultimate Guide to Being a Landlord’ today.

Filled with insights into each aspect of a property investment, you can learn more about researching properties, locations, choosing developments, finding tenants, financing and everything in between.

Download the Guide

Can You Afford to Invest in Property?

 
Firstly, establish whether you can afford to invest in property. You’ll need to calculate your current monthly income and outgoings in an average month as this will impact any additional income and expenses you start to incur.

After that, you’ll likely need to consider what capital you have to hand. If you’re going to take a Buy-to-Let mortgage out, remember that many lenders require at least 25% of the property’s value, although recent government initiatives have encouraged lenders to widen their products.

Once you’ve established how much you have for a deposit and you’ve identified potential mortgages, you’ll be able to work out the loan-to-value (LTV) for different properties. Investment calculators can be useful at this point so you can establish what your mortgage would cost a month and what rental income you can expect to use as cover.

If you’re making a cash investment, you can skip this part of the process and start considering which property is right for you.

 

 

Find the Right Property for You

 
Finding the right investment property for you will require some research into several common factors:

Tenant Demand – This is vital for generating consistent interest in your investment. You’ll always need a tenant if you’re investing in a Buy-to-Let property so understanding how many potential tenants you could expect is a great place to start.

Location – The location itself is an important consideration. You’ll want to understand what the location has to offer tenants including local amenities and businesses. Also consider the location’s future potential by looking at market forecasts.

Past Performance – While looking ahead is useful, looking back is just as important. If your chosen location has experienced above-average growth in the past, it can give an idea of what to expect.

You should also consider your long-term plans. Think about when you might want to sell the property and who might want to buy it.

 

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Complete the Sale

 
Once you’ve chosen your property and arranged your financing, it’s time to complete the sale.

While your solicitor will largely handle these final steps, you still have some work to do. Initially you’ll agree terms with your solicitor and typically pay a reservation fee.

Then, when you complete, you’ll exchange contracts and pay your remaining deposit. If you’re investing in an Off-Plan development, you won’t pay the deposit until it completes.

Final completion involves transferring the funds to the seller’s solicitors, at which you can collect the keys and arrange any other due diligence such as buildings insurance.

Find the Right Tenant For You

 
Now comes the important part (not to say everything else isn’t important but still, this is where you start earning returns on your investment).

The ideal tenant will be different from person to person but ultimately you want someone that will; pay the rent on time, look after the property and wants to rent long-term.

Some of the other useful points to consider in your research include:

Job Stability – A good indicator that the rent will be paid in full and on time.
Right to Rent – A simple check that ensures the tenant can legally rent in the UK.
Background Checks – Usually performed by a letting agent to check the tenant’s previous renting history.
Good Communication – You want a tenant that is honest and open. Encourage tenant’s to report problems – it can mitigate problems further down the line.
Long-Term Renter – Easy enough – the longer they rent, the more consistent returns you’ll experience.