3 things to think about before investing in property
If you’re keen to improve your financial status, the chances are that you will have thought about buying an investment property at some point. For those who aren’t familiar, owning a buy to let property can allow you to generate extra income and benefit from owning a lucrative asset that has the potential to grow in value over time. Before you go ahead with property investment, however, there are some things you need to think about. Here are just three of the most important factors to consider before purchasing your first buy to let property.
Before buying an investment property, the location should always be considered. The area you invest in can mean the difference between high or disappointing yields, along with affecting the cost of the property and the levels of tenant demand you see. If you’re interested in making a UK investment, research the different areas of the UK and find out which cities or regions have strong house price growth, high average rental yields, and a thriving rental market.
In recent years, investing in Northern cities Manchester and Liverpool have proven the best option. These two cities are some of the most affordable in the UK for both property prices and general cost of living, attracting both investors and renters. Properties in Liverpool, for example, can be purchased from as little as £55,995 with property company RW Invest — a price you’d struggle to find in other cities like London. The average rental yield in these two cities stands at 5.05 per cent and 5.55 per cent, with some postcodes generating yields as high as 11.79 per cent.
Every investment comes with some level of risk, and the property is no exception. You could purchase a property with the intention of making regular rental income every month, but find that levels of demand are lacking, resulting in void periods. Property market changes can also occur at any moment, which could affect the success of your investment.
It’s always a good idea to find out about the risks that come with being a property investor so that you take steps to try and avoid them. This could mean only buying properties in areas with a lot of regeneration in the pipeline, and locations with predictions for strong growth over the coming years. To avoid a loss of rental income, choose property types that are seeing a lot of demand, such as student accommodation, and always conduct thorough tenant screening processes to ensure you’re finding reliable tenants that you can trust to pay their rent on time.
One thing that property investors should never ignore is an exit strategy. Within property investment, an exit strategy means to work out what steps you’re going to take when you want to exit out of the venture. For instance, if you plan to sell your investment later in life, be sure to do so at the right time, when property prices are at a high. You may find that you have no intention to sell your property at all and wish to pass it onto family members. Whatever your long-term goals and plans are, creating an exit strategy will give you more clarity and help you feel more in control of your investments.