If you’re interested in getting started in the Buy To Let market and want some tips on how to start investing in property… then read on! This guide is aimed at the beginner property investor who wants to know how to make their first steps.
Why Do You Want to Invest?
People look at purchasing a Buy To Let property for a myriad of reasons, and it’s important to be clear about your own reasons for getting into property investment:
- Is this a way to grow your current finances alongside a full-time job?
- Is this a tool to generate an attractive retirement fund for later life?
- Are you planning to launch a full-time property business and are taking your first steps?
Before finding out how to start and be successful in the property market, ask yourself why you want to do it in the first place. You probably have some motives and a clear idea of what you want to ultimately achieve.
Understanding this will direct you towards the best path to follow. This knowledge can be used to help you create a more considered and detailed strategy, as different motives could lead to different decisions.
For instance, if you’re investing thinking of getting into property to maximise your retirement funds, you should pay a lot of attention to capital growth prospects.
This way, if you decide to sell the property when you reach retirement age, you could make attractive returns on your investment if the property has grown in value overtime – on top of the rental returns you’ve acquired over the years.
Is it Worth Buying an Investment Property?
Property investment is still considered one of the best investment methods for generating consistent returns over time.
At Horizon Lets we believe this is still the path to follow if you want to make money from property, boost your income, grow a diverse investment portfolio, and make returns that will help you in later life.
Learn What to Look For
Once you’ve thought about your reasons for investing in property and your overall goals, you should have a better idea of what to look for in an investment property.
The main things to pay attention to when you’re finding an investment property are:
- The potential rental yields and rental returns available with the property
- The potential capital growth returns you could make
- The likelihood of high demand from people seeking a rental property
A rental yield is a percentage figure that shows the amount you can make in rental returns. Capital growth returns are the returns you make when you’re able to sell a property for a higher amount than you initially paid for it.
With rental yields, the higher your percentage figure, the better. Often, yields of around 6% are considered attractive, with higher figures of 8% being ideal.
Our director and fellow investor, Chris Browne says
“We have helped a few landlords recently with their latest buy-to-let purchase and seen them gain a rental yield of at least 8%. The opportunities are still there if you know where to look…!”
When it comes to capital growth returns, you’ll need to pay attention to properties in areas that have seen significant growth over the past year or so, as well as predictions for high growth yet to come.
Get Sound Financial Advice
Before you even consider how to become a property investor, you should make sure you fully understand how to operate in the property market without adversely affecting your financial health.
Property investment is a big commitment and should never be rushed into. While you might think you have sufficient funds to cover your investment, this may not be the case if additional costs and fees are involved.
So, before you start thinking about how to start investing in property, our advice is to get to grips with the financial aspects involved.
This may mean speaking to a financial advisor to learn about different taxes that buy to let investors are required to pay and get a better understanding of all the money-related lingo and costs involved with the property market.
Our top tip is to treat property investment like any other business plan and put a financial focus on your strategy.
Can I Invest in Property with No Money?
If you are asking about how to make money from property with no money, you’re going to find property investment tricky.
To make a solid property investment, you’ll need to have the funds to cover it. There are, however, ways to invest in property without a huge amount of money.
Buy-to Let Mortgage
Using a buy to let mortgage is one of the top finance options and the easiest way to purchase an investment property if you don’t have much cash available.
You’ll usually need to put down a mortgage deposit of around 25% with a buy to let mortgage. This may be higher depending on housing market demand at the time and currently many mortgage lenders are expecting more than usual for a deposit.
Another option is to pay for your investment using a payment plan, which is often offered by developers selling off-plan properties.
Payment plans allow the investor to split the cost of the property into multiple instalments. This is useful if you don’t have the total amount of cash right away but know that you will in the coming months.
If you don’t have enough money available for a buy to let deposit or a payment plan deposit, but still want to invest in property, the best thing to do is to save up until you meet this goal.
Property Investment Company
Buying property through an investment company is another option and would allow you to explore a range of buy to let opportunities without having to search around for an investment property yourself.
If you are thinking about working with a property investment company, we strongly advise you conduct due diligence on the property company itself, and the company leading the development project.
Do Property Market Research
Whether you are working with an investment company or planning a property hunt on your own, we recommend you research the UK housing market thoroughly before finding a suitable opportunity.
Not every property investment opportunity comes with the same potential!
By researching the property market, you can learn about essential qualities like rental yields, tenant demand, capital growth, and predicted market price changes.
These are all significant components of a solid investment and should make up a big part of all buy to let investment strategies.
Platforms like Zoopla and Rightmove offer information on average house prices and rental costs, and regular reports are issued aimed at investors with up-to-date information on property hotspots. A quick Google search will throw up some very useful results!
You can also check our recent blog on Sheffield as a top buy-to-let hotspot. In fact, northern England generally is attracting serious investors who realise the potential and gains.
Keep an eye on property market trends as well, as they can be a key indicator of the best type of investment property to be considering. For instance, if a UK city saw a high level of demand from young professional tenants but a dwindling student population, investing in residential property would be the wiser choice.
Will House Prices Go Down in the UK?
House prices in the UK aren’t expected to go down anytime soon. In fact, many property experts are predicting the opposite to happen. We hold no crystal ball though, and importantly, no one does so take anyone’s predictions with a pinch of salt.
In their most up to date residential market forecast, property experts Savills expect UK prices to rise by 21.5% by 2025. Throughout 2022 alone, 3.5% growth is expected.
In other regions like the north west, 28% average property price growth is predicted, with higher annual growth of 4.5% in 2022.
To sum up – if you’re serious about learning how to become a property investor, staying on top of property market news is essential. You should also develop a financial strategy which will help you navigate the potential pitfalls and help you with growth and decent returns.
At Horizon Lets we consider ourselves Buy-to-Let experts and are always on hand to give advice to potential or seasoned investors on their next purchase. There is no guarantee of success regardless of what steps a new investor takes, but we believe we can help guide someone in the right direction, so get in touch!
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