What makes a property investor successful?
It’s generally the same with any investment. To find success, you need to do your research and learn from your mistakes.
All investors – whether you’re a first-timer or a veteran – will experience setbacks or make mistakes. The market will go up and go down and the value of any investment can both rise and fall. The most important thing is to prepare for it. Property investment is a long-term journey and there are several important considerations that can mitigate issues further down the line.
That’s why we’ve created the ‘Do’s and Don’ts of Property Investment.’
Do: Understand What Type of Investor You Are
Property investment is a personal thing and everyone has different tendencies. Some may be more risk averse than others or may prefer a more hands-on approach. This is why it’s a good idea to get a measure of what you’re looking for from your property investment before you even plan. If you know that you want to take a hands-off approach and work with partners, this will factor into your overall strategy.
Do: Have a Financial Plan and Know Your Goals
Having a plan before you get started is one of the most important factors of any investment. With clear objectives, you can make more informed decisions that are not ruled by emotion. Your plan will dictate your long-term strategy and potentially even the property asset you opt for.
Do: Look at the Latest Property News
The property market constantly changes from day-to-day. Even without the external factors that are having such an impact in 2020, it’s a fast moving landscape and you’ll want to stay on top of it. A critical form of your research should be regularly checking the latest headlines to help you make a more informed decision.
Do: Stay Ahead of Market Trends
Understanding your local sector is good but knowing the trends occurring across the entire UK property market is better. Our ‘Stay Ahead of the Market’ guides are designed to offer insights into a variety of markets and investment concepts. Looking to learn more about UK property investment? This should be your next stop.
Do: Decide Early If You’re Looking to Build a Portfolio
Diversification is the name of the game in investment and it stands true for property. Whether you’re a beginner investor or moving from ‘traditional’ assets such as stocks, property is a common way of diversifying. If you’re looking to build a property portfolio, decide early on. There are several early steps investors can take that are more suited to buying multiple properties and the earlier you make these changes, the better.
Do: Research, Research, Research!
We’re big believers in the power of research and ideally, you can’t ever do enough. From your chosen partners, to the location your investing in and the asset type you’re going for, performing your due diligence is key for success.
How does property investment work?
Understanding the wider process is obviously a fundamental piece of research. You’ll want to get a handle of the technical side before you move onto finding your chosen partners or investment hotspots. Have a realistic time frame for your chosen investment, especially if you’re going for an Off-Plan investment where build time must be factored in.
Choosing the right investment partners
Researching developers is vital, especially when the market is facing the uncertainty it is at the time of writing. Check their past performance and don’t be afraid to ask questions. You’ll want to know whether the developer has completed projects before (and how many), whether they’re financially stable and reviews they’ve received from other investors.
This is a great time to get a handle on what the developer can offer you in the long-run. While many can help during the purchase, only a select few may offer suitable aftercare services or long-term support.
Finding the top investment location
Researching investment locations properly can make or break an investment. There are many different things that make a town or city an ‘investment hotspot’, although some will have more of an impact than others. Understanding the future potential of a location is a great first step. Forecasts can show potential for growth and how your investment might perform at a fundamental level.
This is the stage where identifying regeneration projects can be a huge help. If you can see that a location is building for its future, you’ll have a better idea of the demand it may be drawing in the coming years.
What does the ideal BTL property look like?
You’ll also want to research within your chosen location to see if your development fits a need that tenants want. For example, tenants are always looking for easy access to transport links. If you’re buying in a development that has a nearby train station and investment into the local infrastructure? You’re onto a winner. Researching these tenant demands can put you in good stead when taking a closer look at high-performing investment hotspots.
Don’t be afraid to opt for quality upfront either. Research developments that have high-specification features and the built-in amenities that the modern tenant is looking for. This can make an investment much easier to market and reduce the chance of void periods.
Current performance and future growth
While this ties in with choosing your location, future growth potential should be a particular focus during your research. Find out current rental yields and what returns that area is forecast to deliver going forward. This can help you narrow down a shortlist of candidates, especially if you know what rental yields you need to be achieving.
At this point you can also get a handle on what market growth different locations have seen in the past and what they’re expecting to see in the future. This typically will help you identify ’emerging’ markets that can be excellent choices for a long-term strategy.
Demand in your chosen area
Understanding the demand that an area is either experiencing or set to see is a great way of narrowing down your research. Demand is the lifeblood of an investment and should be treated accordingly. Look at the supply of properties versus the demand for living in your investment location as this could result in higher yields and natural market growth.
At the same time, consider what drives demand. Does your research show nearby amenities? Things like transport links, bars and restaurants or exceptional business opportunities always draw new residents or workers – a clear signpost of success for your investment.
Don’t: Assume It’ll Be Easy Money
Property investment is very viable for building profit, but it requires work and patience. Performing the relevant research on your location, finding your ideal tenant demographic and maintaining due diligence is just a few of the initial time investments you’ll need to undertake as an investor. Leave as little to chance as possible and you’ll be less surprised down the road.
Don’t: Think That One-Size Fits All
You should have a target demographic in mind and understand how your investment will appeal. For example, if you’re looking to attract young professionals, you’ll want to research city-centre living that offers the amenities and entertainment they’ll need. Students or families will require something completely different and demand will vary from location to location. Just because you find success once, doesn’t mean you will every time.
Don’t: Neglect Your Tenants
Conducting a thorough process for choosing a tenant can help combat issues further down the line, ensuring rent is paid on time and your property doesn’t get damaged. Once the tenant is living in the property, be sure to maintain communication, conduct any necessary maintenance as soon as possible and provide a fair service. The tenant is the most important part of the investment process once everything is in place and will ensure that you’re successful going forward.
Don’t: Be Afraid To Opt for Quality First and Foremost
If there’s been one unexpected side of lockdown it’s that many buyers and tenants are re-assessing their living situations. There’s a lot more people spending more time at home and that’s bought many developments under closer scrutiny. Having a quality apartment with space, multiple bedrooms or outdoor areas continue to be tenant’s top priorities. Ensuring you have these in your own investment can help in the long-term, even if it means a higher initial cost.