While property investment for beginners UK is an exciting journey, it can feel overwhelming at times. There’s a lot to learn when you’re just starting out and, therefore, lack experience for property investment. While investing in UK property may seem a viable option for a stable and long-term investment, it is necessary to keep in mind that property, like any other investment, carries its own risks.
Property investment basics
Before you start looking at properties – you need to work out what type of property investor you want to be.
You may consider:
- Whether you need partners
- Do you want to invest alone, or with others?
If doing this by yourself, any money you make from letting out the property will be yours alone. However, some people are not in the financial position to do so.
So, ensure you know what you can afford before you embark on the journey.
Property investment for beginners UK – How will you finance your investment?
During the planning process, your investment strategy should take into account exactly how you’ll afford to purchase a property. This should happen before making an offer on a house.
There are a number of different things to consider, including:
- Stamp duty land tax
- Getting a mortgage
- The day to day running of the property
- Current property prices on the market
- Whether now is a good time to buy
- Survey costs
- Solicitor fees
However, the upfront costs involved with buying a property should not be overlooked.
What type of investor do you want to be?
When investing in property, you have a number of options open to you. This could be:
- A new career path
- Your main source of income
- A source of extra income on top of another job
With direct property investment, a long-term plan could be helpful.
Choose where you want to invest
Where do you want to invest? Decide early-on. Here, research is the key. There are a number of things to consider, including:
- The average cost of buying a house
- The average rental yield in the area
- The type of tenants in the area (families, students etc.)
- Whether the area is up-and-coming
- How close you want the rental property to be to your own home
Once you’ve decided on the area, it will make choosing the right property to invest in much easier. However, it can be more difficult than anticipated to get to this point.
Identify your target tenant
Who do you want to rent to? It helps to have a target tenant in mind.
For example, if you invest in a studio flat, it’s unlikely this will appeal to families. However, in an area where many residents are postgraduates, this could be a better option.
It can be tough to narrow it down – but it’s worth it. Remember, the area you’re in should play a huge role in deciding your target tenant.
Ask yourself who you would and wouldn’t let to. Would you consider renting to students? This may widen your options, particularly in an area with a number of universities.
Make sure rental returns are competitive
For the best way to start investing in property, high rental yields could be a factor. This can vary place to place, as every region is different in terms of potential returns. But, places with high demand for rental homes could be an option.
You’ll want to ensure that, over time, the property can not only pay for itself but make you a profit. This includes any extra charges, such as maintenance.
Look for opportunities to add value
The UK property market is constantly changing. Even some of the best estate agents can’t predict what will happen next.
House price growth is one of the main reasons to invest. When you eventually come to sell the property, you want to know you’ll make a profit. One way of doing this is by looking for ways to add value:
- Consider ways to refurbish/renovate the property
- Choose an up-and-coming location
The best property investments are those which look to the future, rather than just the here-and-now.
If you’ve decided this is the path you want to take, you may consider some tips to help you along the way.
Ensure you’ve considered these risks:
Rent is not always guaranteed – which may mean you can’t afford mortgage repayments. Avoiding void periods could be an important factor.
You may consider the following factors:
- House prices can fall
- Difficult tenants can cause a number of issues, such as damage to the property
- Major house repairs can be extremely expensive
The potential returns
Despite some inevitable risks, buy-to-let investment can deliver returns. This market can be a very profitable one. Plus, becoming a landlord could be a rewarding career path to follow.
Protecting your investment
One of the most important factors to consider is to find ways to safeguard your rental property. Having a comprehensive, detailed inventory is one of the most significant elements – essential for protecting both landlords and tenants.
Consider the loan options
If you’re not making a cash purchase, there could be two options for buy-to-let when it comes to mortgages: an interest-only buy-to-let mortgage or a repayment buy-to-let mortgage.
An interest-only mortgage allows you to repay the interest only, and at the end of the term pay off the lump sum. This could be an option for those who are disciplined, as they pay lower instalments (interest only). If borrowers save up the difference between their interest-only payments and what they would have paid for a repayment buy-to-let mortgage (which is the other option), they might be able to pay off the lump sum well ahead of time.
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There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.
Please remember that investments of any type may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.