Property investing has the potential to be highly lucrative. According to Seven Capital’s 2021 UK Property Investment Report, in 2020, UK house and rental prices rose 14.5% and 8.5% respectively. It’s these sorts of figures that attract plenty of would-be investors to the asset class, but property investing isn’t as simple as finding a house, buying it, then watching the returns roll in.
It’s full of risks, and these are magnified if a careful approach isn’t employed early on.
If you’re a first-time property investor, we’ve brought together three essential tips you should bear in mind when starting out.
Following them should help you avoid the pitfalls and kick off your investment journey the right way.
Create a property investing strategy
Before you do any investing, it’s important to develop a strategy.
Firstly, why are you investing? Do you want to generate income, or are you searching for a place to safely stow away your money?
Second, what do you want to invest in? Do you want to refurbish homes and quickly sell them, sit on them as prices rise, or rent them out? If you intend on the latter, will you advertise privately and personally respond to tenant requests, or pay a property management company to do the legwork instead? What sort of tenants will you cater towards?
Consider your goals, capabilities, and future circumstances. That way, you won’t be hit by any surprises later down the line.
Reduce your exposure to risk
There are a large number of risks inherent with property investing. These are typically avoided how you might expect: research and diligence.
Before rushing into a purchase, research locations, then understand the typical prices, increases, and rental yields on properties in the area. If refurbishing or reselling, is there high enough buyer or investor demand? If renting out, check to see whether there is enough demand for rentals in the area. Can you afford the properties, upkeep, mortgages, and so forth? Consider everything carefully – the more information you are armed with, the better.
With such a large, complex purchase that hinges on so many legalities, independent support is also crucial. Hiring a conveyancing solicitor will ensure you know the seller can legally exchange the property, and they will also make sure that the land and finances are all in good order and ready for the all-important exchange of contracts. With their help, you can get on with making your strategy a reality.
Start small, grow later
Whatever your goals, if you are a first-time property investor, it’s foolhardy to invest in multiple properties at once. Begin with one, smaller property, gain experience, and use this as a launchpad on which to grow your portfolio later down the line.
This way, any mistakes you make early on (there will be many!) will only have a limited effect, and you will be able to go forward investing in further properties much more confident in your decision making and skills.