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Do’s and Don’ts of Property Investment

birmingham property development

Do you know 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.

Here are the do’s and don’ts of property investment.

Do consider a property portfolio as a way to diversify. Whether you’re a beginner investor or moving from a more ‘traditional’ asset class such as stocks, property is a great way to diversify your investments. A property portfolio, in particular, is even more useful, allowing you to invest in several different property types and locations, providing a further layer of diversification and helping to mitigate any issues that can come with having all of your investments in one basket.

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.

Do research each and every area you’re looking to invest in. As an investor, you’ll always want to avoid buying for convenience. Buying close can be tempting so you’re always on hand if there are issues but if the area doesn’t have the demand, it’ll hinder you in the long-run. Always look for promising areas that have everything your ideal tenant will be looking for.

Don’t assume that one-size fits all for property investment. 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.

Do look at your property investment strategy and how your investments fit in with it. Some investors are looking for passive income, some are more focused on capital growth. It also depends on your aversion to risk. Some strategies can be much riskier than others and it’s vital that you take into account your personal goals and circumstances.

Don’t neglect your tenants. Finding the right tenant for your strategy can help combat issues further down the line, ensuring rent is paid on time and avoiding void periods. Once the tenant is living in the property, be sure to maintain communication either directly or through managing agents. Conduct any necessary maintenance as soon as possible and provide a fair service.

Do consider taking advice. Building your investment strategy can be the perfect time to speak to a financial advisor, especially if you’re just starting out.

Do prepare for void periods. With any buy-to-let property investment, void periods can occur. Over the long-term, it’s important to make provisions for changes in the market, whether it’s going up or down. Void periods can be costly, especially when compounded over an entire portfolio. Seasoned investors will use positive cash positions to accrue wealth, building up the ‘coffers’ to offset any potential market dips or void periods.

Many people enter the property investment market but not everyone is successful. Following these tips is a great way to give yourself the best chance of succeeding. If you have any questions regarding property investment, get in touch. 

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