A guide to property investment

You’re looking to invest in something reliable and exciting with an excellent future and loads of potential? Think property investment. If you’re researching: what property investment is, this is your guide. We’ll take you on a whistle-stop tour of the ins and outs of investing in property, delving into how to do it, the different types of property investment you might like to get involved in, and how to find the perfect property. Read on for property investment inspiration!  

What is property investment

Property investment involves buying a property with the intention of earning a return through rental income, the eventual resale, or both. This means properties can be either a short or long-term investment. All sorts of people get involved. Some want a reliable regular income, others are seeking good capital growth as the price of properties continues to rise. Some are keen to help out friends or relatives by buying a place for them to rent. 

It’s a particularly flexible investment, with a huge choice of property types, locations, and types of tenants to think about. Perhaps you want to buy a flat for your son and daughter to live in. Maybe you want to buy a large, multi-bedroom house near a university or college to rent out to students. You might invest in a super-smart contemporary flat in a new block to rent out to a professional couple.  The potential is endless, offering so much more choice and flexibility than sticks and shares, art and antiques, and everyday financial vehicles like savings accounts. 

How to invest in property

If you’ve decided it’s a wise move, where do you begin the process of investing in property? First, you need to get familiar with all the rules and regulations around financing buy to let, and about the renting itself. The rules differ, for example, if you’re renting to someone you know. Once you’re familiar with the legal and financial aspects of buying, you can search for the perfect place with confidence.

It also makes sense to figure out the best time to invest. Are there any political, cultural or social changes due that might affect where you buy, what you buy, and how you fund it? Have any of the financial rules and regulations changed, or are they about to? Could you wait a while to take advantage of a special offer like a Stamp Duty holiday? Property prices are affected by crises and political tensions. Brexit, for example, is causing a shift in the UK property market, with investors more wary than they were before we left the EU. It’s worth keeping an eye open for small but valuable price drops in some areas.

Next, plan your investment strategy. It makes sense to treat investing in a property as a business decision. Decide exactly what you want to achieve from your investment, in what timescale. Set formal goals. Look at the worst and best-case scenarios to check you’ll still be able to cover the mortgage if circumstances change. Find the perfect location. Check the rental incomes in the area you want to buy, then plan how you’re going to identify places to view. And know, up front, exactly what sort of property you want to invest in. All this will stand you in good stead, preparing you for every eventuality. 

Different types of property investment 

Buy-to-let

Buy to let simply means buying a property to rent out as an investment, whether you let to friends, family or strangers. Because the property’s value is likely to go up over time, buy to let investments also come with great potential for capital growth. It’s an excellent way to generate a regular income. On the downside you could have issues with tenants, the place could be left empty in between tenants, or your tenants could end up causing expensive damage to the property.  

Property development

Property development involves buying a place, doing it up, then selling it on for more than you paid. Sometimes called property flipping, it can make an excellent profit, even including the costs of the refurbishment. It’s amazing how something as simple as painting, decorating and making a place look good can push the value up. On the other hand you can end up spending a lot more than you predicted on getting the place into shape, using up all your profits and leaving you back at square one – or even out of pocket.

Buying a new build to sell on

Some investors buy brand new homes to sell on. Some even buy off-plan, before the property has been built. Off-plan investment is the riskier option, simply because while it might look perfect on paper, the reality can be very different. Many new homes are being built on flood plains, for example, which comes with future flood risks and related insurance problems. The build schedule could slip, leaving you hanging. On the positive front, new builds often have amazing selling points, things like solar panels and heat source ground pumps. You might even be able to tap into lower prices when you buy early in the build process then sell for a fast profit once it’s finished.  

Investing in property abroad

An investment abroad could see you making great returns on holiday rentals. It’s amazing what you can charge for a two week stay in a beautiful home in a hot sunny place, or a small flat in a popular region or resort. On the downside, because you’ve bought a long way from home it can be tricky to keep things under control and hard to visit to check everything. A local letting agent may be a wise move, someone who’ll manage the investment for you on the ground. Changes like Brexit can also affect overseas property investment. Brexit has made travel to the EU a lot more complex, which is affecting people’s holidays. 

Real estate investment trusts

A REIT or Real Estate Investment Trust is a tax efficient investment vehicle built around rental property, traded like stocks and shares. The trust owns and manages the properties, whether they’re domestic or commercial, with the goal of generating a rental income. It’s billed as an easy and effective way to enjoy good returns from commercial property, residential property, and the profits from property development. It even comes with handy tax breaks. On the downside, REITs can deliver negative total returns when interest rates are high or rising. Because REITs are traded on the stock market, they come with the same sort of risks you face with equity investment. Long term returns can be impressive but when property prices go down, as they did in 2007 to 2009, your investment can suffer.

How to find the right property

The ‘right’ property depends on what you want. It could be a place in the perfect area or region, where the best rental incomes are. It might be the perfect type of property, for example a multi-bedroom home to let to a large family or students. You may want to buy near a university or college, or buy a new building on an out-of-town estate. And, of course, you’ll need to figure out exactly how much you want to spend.

How do you work out whether you can afford to buy the place you want? Most lenders provide a mortgage calculator online. It makes the process very simple and fast. It’s important since every lender has a different way of calculating how much they will lend. It’s usually based on your income, the size of deposit you can put down, the regular expenses you have to cover, and your credit rating. You’ll need to get accurate figures from the lender before deciding to accept a mortgage offer.

Now you know what property investment is and how to get started

Now you understand how to invest in property, the different kinds of property investment, and how to find the perfect investment, you’re ready to begin an exciting process that could change your life and finances for the better. We’re experts in property acquisition, development, sales and rental. How can we help you?