Considerations for new investors

UK Housing Market

Sometimes, up and coming entrepreneurs and budding property investors will be left feeling out of their depth when contemplating taking the plunge into buy-to-let property investing. After doing some internet searching, they will discover a vast amount of information out there in cyberspace, which will often leave them more confused than when they started looking.

However, the curious investor need not feel overwhelmed. Getting into property investing is probably much simpler than you think. There are several considerations for new investors to remember when starting out on your investment journey, which will help guide you along the process. They will also greatly improve the likelihood of success in the long-term.

Start with self-education

As with any important endeavour you will take on, researching and educating yourself will be essential to kick things off on the right track.

Since many new to property investing never manage to move beyond their first two property investments due to lack of strategic planning, it’s important you are not one of these.

Don’t just jump in with the first property that you come across. There are many on the market that will fall short of delivering a good Return on Investment (ROI). The key to researching is to look closely at what strategies successful property investors have used in the past, and why they worked for them. Reach out to them and find out what they have learned which you can use yourself. Experience is far superior to any theory.

Strategic property investors know the importance of early planning to mitigate pitfalls down the line.

Research

Location is key, as property performance is heavily influenced by the location of the property. In this regard, there are salient principles to consider.

Locations where economic growth is good. Where there is strong economic growth, you will see higher demand for rentals in the area. In connection with this, good job prospects are another thing to look for.

Locations with a healthy population growth trend will be beneficial as it will push up demand for housing and rentals in the area.

Lastly, research locations where wages have grown the fastest compared to the national average.

The above things to look out for will be especially prominent in major cities.

Be realistic with your budget

Financial resources and time commitment will be necessary to get your first investment project off the ground and make sure the property is ready to be rented out. Ask any seasoned investor. The early stage of investment will need resources, so be prepared. The amount of time that you will have to put in will depend on whether you are able to pay for property management services.

Put away a small sum each month for any unexpected emergencies. You never know when you will need that extra cash for the inevitable work that will pop up at some point.

Choose the right property

Once you have set your sights on the right location that shows good potential for performance, it’s time to choose the right property in that location.

The sorts of things that will determine the potential of a property are numerous, which include the following. Is the property located near schools and further education institutions? What is the public transport and infrastructure like? The potential capital growth and the ability to add value to the property is another important factor to consider. Look into the demand and scarcity in the area for the rental market.

Think things through carefully

Before jumping right in, give yourself time to think through and reflect on all the facts that you have gathered in your research. Discuss it with others and, if possible, run it by investors that have already trodden the path you are thinking of taking. It’s a big decision with big commitments.

Taking the time to research and find the right property is particularly important if it’s your first time. Once you have done all this and the due diligence, however, and found the right property in the right location, it’s time to get moving.

Property insurance

A vital step in property investing is shopping around to find the best landlord insurance deal you can get. Your mortgage lender will likely want to see proof of insurance before they release the funds, as they will want to make sure that their part of the investment is covered in the event something should happen to the asset.

The landlord’s insurance will cover malicious damage to the property, and it will also cover quiet periods when tenants are hard to find and there is no rental income. It will also cover damage caused by the tenant, thereby taking the property out of the rental mark for a short time.

See for your self

Descriptions and photographs of properties are all well and good, but always visit the potential property investment yourself and view it with your own eyes. Take a good look around and ask questions.

Granted, this is not always possible for some reason. When this happens, consider hiring someone to do it for you, giving you the clarification and peace of mind, you need. This will allow you to make an informed decision and not go in totally blind and potentially lose money.

The first investment can be a bit daunting, but by following the basic steps above, they will put you in a good position to get on the right track and hopefully avoid wasting time and money.