Like a lot of people, you might be sitting on a lot of savings, and wondering what to do with it. Sure, it’ll develop a little in a bank account. However, investing your money can make it grow exponentially over time. One of the most popular forms of this is property investment, thanks to its long-term gains and stability.
Although it may be more manageable than other methods, you can’t get stuck into investing without some preparation. Here’s a great place to start! The following is a guide for new investors looking to start getting into property investment. I hope it helps!
So, why choose property over other investments? As with any security, property has its own benefits and drawbacks. Still, when you stack it up against stocks or bonds, property is one of the safest, simplest securities you can invest in. To make sure that property investment is for you, you should weigh up a few important factors.
One of the main pros of property is that it’s notably safe compared to other investments. The property market is one of the few which isn’t totally dominated by investors. This creates a natural shock-absorber for any new investors taking their first steps into the market.
Capital growth, in a lot of cases, is more or less assured too. Even if you bought a terrible house in a terrible area, you’ll have a fair chance of its value increasing over time. There are still risks involved with property investment.
However, unlike a lot of other securities, you can insure these against a lot of mishaps. Whether it’s fire, damage or a tenant breaking the lease, you’ll be able to find policies for guarding yourself against it.
Another advantage is that you don’t have to understand the market inside and out to get started. Investing in stocks and other securities can be financial suicide if you don’t understand them enough.
Property, on the other hand, changes in value slowly. There’s nothing wrong with purchasing one property, and learning the best moves as you go along. You also have a lot more control over a property, compared to another security. You can make any change you can afford, and control your returns.
So, the disadvantages. The main thing which turns more experienced investors off of property is the liquidity of it. With other securities, if you run into some financial trouble, you can sell them in the blink of an eye. Of course, it’s possible sell property.
However, the process is going to be much slower. Another drawback is the amount of different costs tied to a property. There’ll be a deposit, conveyance and legal fees, as you know. The fun doesn’t stop there though!
You’ll need to pay for fitting out the house, repairs, landlord and building insurance, water rates, council rates and a lot more. You can mitigate these complications by hiring an investment specialist. Experience Invest is one example. If there’s one big pitfall in property investment, then it’s rent-free periods. Whenever the property is vacant, and you’re unable to find a suitable tenant, you’ll still need to keep up with mortgage repayments.
Finally, there’s the opposite risk of bad tenants. While not really a financial issue, they can cause months of stress and legal hassle.
If you think you can cope with these traits of property investment, then it’s time to get to work! The first thing you need to decide on is the time you’re going to buy your first investment property.
For this, you’ll need to understand a bit about the property cycle. The entire property market moves in phases. Values may rise during times of healthy growth, and freeze or drop during other phases.
If you’re hoping to be a successful investor, you’ll need to understand what stage the market is in. Then, you can figure out the price you should be paying for different properties. Property Observer has a helpful introductory article on this.
Understanding the significance of location is also an important skill to have. Choose the right location, and your chances of getting some high returns will be far better. In a lot of cases, finding a good location is simple.
Generally, the closer to amenities the property is, the better. Schools, public transport stations, and shopping outlets are all good signs for a location. As a precaution, try to avoid areas which are dependent on one or a few industries.
For example, a small town with a single manufacturing plant. You can make a lot of gains when the industry is doing well. However, when it declines, your property’s value will decline too.
Of course, you can’t just throw a dart at a lucrative location. You need to choose the specific property wisely as well. The ideal property will stay in constant demand from tenants or house buyers.
One big factor to consider is the average age of people in the immediate area. Whenever you’re looking to buy a new property, you should do some research into local demographics. Pick out patterns and high populations of a certain demographic.
Then, you can target properties which would appeal to that demographic. For example, if there’s a university in your location, go for small, affordable housing. If there’s a big elderly population, then avoid property with a lot of staircases and inconvenient structures.
My final piece of advice is to look into the prospective ROI. One of the biggest mistakes a property investor can make is buying on instinct or emotion, rather than hard figures. Property investment is safe compared to other types, but remember that it’s not airtight! Make sure to apply a lot of logic before any purchase. Make a rash decision, and your capital growth will suffer. In the worst case scenario, you won’t be bringing in enough income from rent to cover other monthly costs. In property, once you’ve got into one of these holes, it can be pretty hard to dig yourself out!
Consider all these factors as you join the world of property investment. If you do your homework and keep a level head, the sky’s the limit!