Top 17 Tips for getting started in Property Investment
Thinking of Buying an Investment Property? Here Are The Top Tips:
Buy to let property investment is one of the most lucrative ways to make the most out of your savings, and more and more people are now seeking out advice on getting into property investment. If you’re keen to learn how to become a property investor, these top tips for property investment are designed to prepare you for getting started on this profitable journey and give you the best knowledge and skills on how to invest in property as effectively as possible.
There are a number of things to consider when thinking about how to start investing in property, like where you are going to invest, what type of property you want to purchase and what are the tax implications of your investment. Whether you’re looking to make a one-off investment or you’re wondering ‘how do I start a property portfolio of my own?’, we cover some of the most important property investment tips and property investment advice you need to know before starting out.
Download Your FREE Property Investment Tips E-book Today
Enter Your Details for Instant Access
Click Icons to Jump to Section
Consider the UK Property Market
In recent years the buy to let market has taken a few knocks, with changing tax policies and potential price rises. However, the benefits of property investment far outweigh these.
The demand for rental properties in the UK is higher than ever before with a growing need for high-quality rental accommodation ensuring a steady stream of tenants. When it comes to investing in properties, considering the UK buy to let market is one of the most important property tips to find the best property investments in the UK for 2019, 2020, and beyond.
What is an Investment Property?
An investment property is a property which is purchased in order to generate a return on investment. The two ways people benefit from making an investment in property are with regular rental returns, returns from the future resale of a property that’s grown in value, or both.
What Is A Property Investor?
A property investor is somebody who purchases one or several properties for the purpose of renting them out or selling them for a higher cost. The role of a property investor is normally carried out alongside an additional career, but making an investment in property can sometimes become a full-time career in itself.
Can I invest in Property?
Those interested in investing in properties can do so in a number of ways. Some people choose buy to sell property, while others select buy to let. Buy to let is where you purchase a property with the intention of letting it out to a tenant, and is one of the most popular property investment strategies.
Without considering buy to let, you’re missing out on the potential for long-lasting returns rather than just a one-off payment. If you’re thinking about how to invest in property, don’t ignore your buy to let options.
Is it a good Idea to invest in property?
Property investment can be a great idea for those who want to generate additional income. Buy to let property investment can bring an ongoing income in the form of rental returns, along with the potential to gain large returns if your property’s value grows over time.
Unlike other investment strategies, buy to let property investment allows investors to receive monthly or quarterly rental returns from tenants. Capital appreciation in property investment can be equally impressive, with certain areas of the UK reporting record house price rises. The popularity of property investment has led many people to question the potential of a property compared to a pension when it comes to saving for retirement. In the great pension vs property debate, many people choose to combine their investment property venture with a pension for maximum returns.
Along with capital growth, if you want to know how to become a successful property investor, you’ll need to focus on trends like rental demand. The number of people in the UK living in rental accommodation is higher than ever, with major increases over the last few years. Due to a lack of social housing and the difficulties faced by people wanting to buy their first home, there are a record number of people looking for rental accommodation, leaving more opportunity for buy to let investors.
How to get into Property Investment
If you want to get into property investment, you need to ask yourself two questions — what do I need to buy an investment property, and where is the best place to buy an investment property? Research the main elements of property investment, and decide which location offers the best opportunities.
When starting out in property investment, it is important to do your research to find out if investing in properties is right for you, and to look at the UK buy to let market in detail. Resources like our property investment guides are ideal for understanding what makes a good property investment and how to find the best investment for you.
Being well informed on things like rental yields, demand, and capital growth is also important in property investment, ensuring you can make the best and most profitable choices as you begin your buy to let journey. Being clear on these factors and knowing whether or not property investment is right for you is the best way to start investing in property.
How do I buy an Investment Property?
If you want to purchase a buy to let investment property, you can either do this by paying the property’s price in full or with a buy to let mortgage. This will largely depend on the type of property you want to invest in and the property investment company you use.
In recent years the buy to let market has taken a few knocks, with changing tax policies and potential price rises. However, the benefits of property investment far outweigh these. The demand for rental property in the UK is higher than ever before with a growing need for high-quality rental accommodation ensuring a steady stream of tenants.
Explore Different Property Investment Strategies
There are different property investment strategies to consider when you first get started with buy to let. Before considering all the steps involved with property investment, you first need to establish the best buy to let strategy for you and explore the different options.
The most common types of buy to let are residential and student property investments, but there are some other types of strategy that you could follow. Here is a guide to rental property investment strategies that are important to explore when it comes to how to start investing in property.
Traditional Buy to Let
Traditional buy to let is when an investor purchases a residential or student property which they’ll let out to tenants to regularly generate an income. Those who opt for a traditional buy to let investment strategy are likely to purchase an apartment rather than a house due to the lower costs and higher demand, especially in city-centre locations.
The reason why this is often considered the best buy to let strategy and the best way to invest in property is because of the benefits involved. When you do the appropriate research and planning, traditional buy to let can provide you with attractive rental returns and plenty of tenant demand. With this type of investment, you’re also more likely to benefit from increased capital growth potential, providing you with an attractive return on your investment when you decide to sell the property. Find out more about buy to let investment with the buy to let episode of our RWinvest property podcast.
Along with student or residential property investment strategies, another option is HMO investment. This is similar to a more traditional buy to let strategy in the fact that you own a property which you’re renting out to tenants. The difference is that by investing in HMO properties, you’re able to rent to multiple groups of tenants within the one building – that’s why they’re called Houses of Multiple Occupancy.
But are HMO a good investment? Owning HMO investment properties can come with some benefits, including increased cash flow, while disadvantages like more costly and time-consuming management turn many investors away. If you’re considering an HMO investment, it’s important to read up on HMO investment properties to make a more informed decision.
Hotel property investments are another option for those researching different property investment strategies. Hotel investment in the UK means purchasing a hotel room and generating returns thanks to guests staying in the hotel. This works in a similar way to the more typical type of property investment, but with shorter tenancies.
Like HMO’s, there are pros and cons to hotel investments. One of the main reasons that some people consider hotel investments as the best property investment strategy is the fact that you’re able to generate high rental yields due to the cost of hotel stays. The downsides, however, are that you’ll need to ensure that the hotel you invest in is popular enough to bring in a lot of demand. You also have less control with a hotel room investment since you don’t own the entire property, leaving you at risk if the company was to fail.
What is the Best Type of Property to Invest in?
When trying to decide on the best way to invest in property, you should think about your main goals for buy to let and whether or not each strategy reflects them. While hotel investments and investing in HMO properties can be a good route to take for some, these are not usually considered the best type of investment property when compared to traditional residential and student buy to let. To fully take advantage of all that’s on offer from buy to let, residential and student property investments are a solid choice to make when getting into property investment, and are recognised as the best property investment strategies.
Understand What’s Involved
Before getting started with buy to let, it’s important that you fully understand what’s involved with a property investment venture. Investing in the UK property market may be promising, but it also requires a lot of preparation. In this section of our property investment guide, you can find out some of the most common things to consider and understand before making a buy to let purchase.
Learn About the Rules of Investing in the UK Property Market
When investing in the UK property market, you need to adhere to certain rules and follow different legal requirements. One of the most common legal requirements involved with buy to let investment is that you’ll need to pay attention to tenancy laws when renting a property out to a tenant. This includes offering a tenancy agreement and keeping any tenant deposits in a protected tenancy deposit scheme. Other rules for buying an investment property include keeping up with any tax payments that are required, and deciding between a freehold or leasehold property purchase. We’ll cover buy to let taxes a little further on in this guide. To read about freehold vs leasehold, take a look at our in-depth guide.
Think About the Right Time to Invest in Property
On a personal level, the right time to invest in property is when you have enough money available to do so. Being financially stable is one of the most important things to consider before you go ahead with an investment, so make sure you take the time to fully assess your finances before beginning your buy to let journey.
When investing in the UK property market, the best time to invest in property is when the market is at its highest-performing level. Right now, the UK market is looking highly promising due to predictions of increased property price growth over the coming years. With property prices still being affordable in a lot of UK areas, those considering making an investment should do so soon, before average house prices rise.
Know the Risks
Although getting started in property can be a rewarding venture and a fantastic way to reach your financial goals, there is still some risk involved. While not as high-risk as other investment strategies such as buying stocks and shares, getting started in property isn’t always a guaranteed road to success.
Going into a venture with some uncertainty surrounding it can make you question ‘how do I invest in property and make sure it’s a success?’. If you’re wondering how to start property investment in the safest and most sensible way possible, it’s crucial to know about the risks involved such as loss of income and negative growth.
This way, you can work out a strategy to avoid your investment being affected and improve your chances of a positive venture.
Is Property a Safe Investment?
While property is by no means a completely safe investment, it can be a lot less risky than other asset classes. By identifying the risks involved and creating a strategy to avoid these, you can help to minimise any potential hazards and set yourself up for a strong venture.
One of the main risks associated with property investment is the fact that your property could decrease in value depending on the state of the property market. While this is always a possibility, conducting extensive research into property market predictions can help you avoid this.
Although predictions can change depending on a fluctuating market, research suggests that the UK will see positive house price growth over the next five years, particularly in the north-west. Purchasing a property in a UK property hotspot will reduce the likelihood of a risky investment. You should also think about whether any regeneration is set to take place in the area surrounding the property, as this could boost growth further.
Another risk that those investing in property need to be aware of is unreliable tenants. Tenants that struggle to pay their rent on numerous occasions can hurt your rental income, or even worse — the tenant could stop paying rent altogether.
Bad tenants are every landlord’s worst nightmare, but the good news is that with a bit of preparation and some insurance, this risk can be avoided. Be sure to conduct thorough tenant screening, whether you do this yourself or use a management company.
Tenant screening reveals things like employment history and runs credit checks so that landlords can be made aware of any financial issues. In your landlord agreement, you could also state that you’ll charge a late fee on delayed rent payments, making them aware of the exact date that rent is due.
Are Investment Properties worth it?
Investment properties are worth looking into if you want to generate an ongoing passive income. This type of investment can also offer you the chance to make big returns later in life. To get the most out of property investment, research the market, and be aware of how to avoid any pitfalls.
How successful are Property Investors?
Property investment can be a very successful venture for many people, especially those who are savvy to market changes and pick and choose the right opportunities. Successful property investors are knowledgeable, patient, focused, and decisive — with an ability to spot the best investments.
How do I choose an Investment Property?
When choosing an investment property, you should focus on high-growth areas, think about the future, seek out the highest rental yields, and consider the wants and needs of your tenant. Look for opportunities with the least risk and the highest potential for long-term success.
Choosing an investment property is a crucial step of your investor journey and one of the key property investment tips for UK investors to keep in mind. By staying vigilant to the property market and thinking about what’s on offer, you give yourself a better chance of avoiding any potential risks.
Find the Best Property Investment Location in the UK
So you’ve chosen buy to let, but you’re still unsure on how to get into property investment? When investing in property, tips are important to look out for, and one of the most common property investing tips is to research your location. A smart investor only selects the best performing UK regions for buy to let developments, which tend to be in urban areas.
Location is key to finding the best property for investment. Relentless regeneration is taking place throughout many central zones, most notably within the Northern Powerhouse. Northern hotspots like Liverpool and Manchester are now stealing the property top spot from cities in the South, causing the North to be considered the best place to invest in property for UK investors.
Around £3.4 billion in growth deals has been dedicated to regeneration in the North, highlighting the vast amount of money being ploughed into sectors of interest such as skills, innovation, transport and culture. In the wake of this renaissance, tenants are flooding to these thriving, modern cities which are helping to rebalance the UK economy.
What should I look for in an Investment Property?
For anyone buying an investment property, knowing what to look for is crucial. When looking for the best property investment, UK areas should play a big part in your decision. This should include the type of rental yields on offer, the level of demand, and the potential for capital growth. You want to ensure your property will attract a steady stream of tenants, providing you with consistent rental returns.
One of the most important property tips is to always research the location to find out the type of rental yields you can expect from your buy to let investment, along with whether your property will be likely to increase in value over time. Areas with positive predictions for house price growth and a track record of past investment success are something to look out for.
The north-west region, for instance, has house price growth predictions of 21.6 per cent over the next five years — higher than any other UK region. Investing in a city with strong capital growth potential and high average yields puts you on the right track towards a lucrative investment.
Why invest In Liverpool Buy To Let?
When it comes to investment properties, Liverpool’s property market is an option that’s definitely worth thinking about. With high house price growth in recent years and predictions to thrive even further, even when it comes to property prices after Brexit, Liverpool is a fantastic buy to let hotspot.
Competitive property prices in Liverpool offer lower-cost buy to let units which assure better yields than London. If you’re thinking about going North when investing in property, Liverpool is home to six postcodes in Totally Money’s Top 25 Buy to Let Property Hotspots and dominates the first three places.
Liverpool has the fastest-growing economy in the UK, bolstered by flagship developments such as the £5 billion Liverpool Waters scheme and the Regenerating Liverpool masterplan. The Liverpool Local plan is aiming to deliver 38,000 new jobs and 35,000 new homes by 2033, boosting the population above 500,000.
Our investment properties such as Poet’s Place in Liverpool have been developed within the most desirable Liverpool property investment postcodes, generating higher yields and attracting tenant demand.
Why invest in Manchester Buy To Let?
If you fancy taking another avenue into property investment, Manchester is the UK’s second city and the North’s answer to London. Set to see population growth of 14 per cent over the next twenty years, this city attracts plenty of rental demand and holds the best graduate retention rate outside of London.
This leading property market is seeing more new builds than most other cities and is home to a whole host of major businesses. Rated number one for residential price growth by property specialists, invest in property Manchester to get a superior level of capital appreciation.
Properties like our Manchester Bridgewater Wharf development consist of high-quality apartment units located in a thriving part of the city, ensuring a strong potential for capital growth and a steady influx of tenants demand.
Is London still a Good Investment?
London property is no longer viewed as the best place to buy an investment property. During the first half of 2018, London landlords spent 40 per cent less than in 2015. House prices in London are simply too high for many investors, paired with low average rental yields and plummeting house price growth.
This shift in the London property market has led a lot of investors to look elsewhere, recognising cities with high-performing markets like Liverpool and Manchester as the best places to invest in UK property.
Which Cities Have the Best Property Investments for 2019 and 2020?
For 2019, Liverpool and Manchester prove to be the best places to invest for UK property investment. These cities offer the best property investments for UK investors as they have some of the best rental yields, tenant demand, and house price growth of recent years, with predictions to thrive even further by 2023.
Understand your Tenants Profile: Student vs. Residential
Another significant factor that’s integral to answering the question of how to invest in property is identifying your target tenant. It is difficult to separate location and its occupants, as the two come very much hand in hand. Identifying the best investment property for your target tenant helps you get one step closer to a successful investment.
If you prefer to invest in property in a specific sector such as student property, you should keep this in mind when picking out a location. You will want your property to be close to a buzzing university campus and have great transport links. Alternatively, if your property interests favour residential developments, you should invest in properties close to business districts with exceptional leisure facilities nearby.
By deciding who your ideal tenant is and what they are looking for, you can purchase a property that has a great appeal for them. For example, if you want to appeal to students then the best type of investment property might be one located in a lively area, while the same location may not be ideal for older tenants.
Student property has been growing in popularity over recent years, with a huge overseas demand for UK student property investments. The UK’s higher education institutions are world-class, and there are not enough student bed spaces available at the moment.
Students are paying more than ever before for their university accommodation, and rental yields are rising too. With low entry costs and an increasing standard of student accommodation, student property investment can be a lucrative strategy.
Student property is not only a good idea due to the high rental yields and steady demand, as students are also considered one of the best tenant types by many landlords. Because students care about their education and keeping their accommodation, they’re likely to pay their rent without question to avoid any trouble. With the majority of students being at a younger age than other tenants, they also tend to see the landlord as an authority figure and so treat them with a lot of respect.
Do you have to be a Student to live in Student Housing?
Student housing is generally only available to students. This type of housing is specially designed and marketed towards students, often with lower prices, proximity to university campuses, and amenities that appeal to this demographic. The student population in the UK is high, resulting in a lot of demand for student accommodation.
With such high demand, renting out a student property to non-students is a bad idea as it will take the accommodation options away from students that need them. For renters who are attracted by the designs and locations of student properties, residential properties are likely to appeal to this tenant type. Residential properties, such as those that we offer at RWinvest, are often based in prime city-centre locations and have modern, stylish designs.
Residential properties are another in-demand market in the UK. More young people are choosing to live and work in cities like Manchester and Liverpool. This is driving the demand for quality city-centre residential properties, which is good news for investors looking to make large returns.
For residential properties, the tenant type can vary depending on the property and its location. Young professionals are often the most popular type of tenant for residential properties located in or close to the city centre. Single professionals make good tenants as they work hard, tend to have stable, high-paying jobs, and are likely to rent on a long-term basis.
Similarly, young professional couples are the ideal tenant for a lot of landlords as they tend to look after the property due to sharing housework or hiring a cleaner, and will see the property as a space to entertain friends and family. Since there are two people paying rent, there’s likely to be no issues if one tenant becomes unemployed as the other tenant can usually cover costs temporarily.
How do I find a Tenant fast?
To find good tenants, you need to offer the best properties in the most in-demand areas, market them effectively, and carry out thorough tenant screening. In the UK, there are a lot of tenants seeking residential and student properties. The property you choose is the first step in knowing how to begin property investment successfully.
Along with being well-located, your rental property should be presentable in order to quickly attract tenants. When buying an investment property, looking for properties with stylish decor and modern features and facilities is one of the key investment property tips if you want your property to stand out. This could mean investing in new-build properties with smart lighting, along with attractive features like a private balcony or on-site gym.
Once you’re sure that your property ticks all the boxes and will appeal to your target tenant, use rental websites, social media, and word-of-mouth for advertising your listing. Remember to always include professional imagery of your property and concise, well-written content to draw in potential tenants.
Decide Between Off-Plan and Refurbished Properties
Now that you know how to buy your first investment property in relation to its location and tenure, it’s time to talk about off-plan versus refurbished properties. Whether you decide to invest in an off-plan or a refurbished property will have a big impact on the outcome of your investment.
Both off-plan and refurbished property investments offer different benefits depending on what you want from your investment, and also some risks. So what does this different terminology mean?
What does buying an Off Plan House mean?
Buying an off-plan house means purchasing a property before it’s been fully completed. This means that the property is still in the planning or development stages. Off-plan property is a popular investment type due to the potential for capital gains, the lower costs, and the appeal of a new build.
What is a Refurbished property?
Refurbished properties are typically historical buildings or period properties that have been renovated to meet modern standards. Refurbished properties can be popular with investors who favour the charm of older builds and want to put their own spin on an existing property. Those who want to become a property developer will typically focus on this kind of project.
Is buying Off Plan cheaper?
Buying off-plan property can be cheaper than buying a completed property. Many off-plan projects are offered at a lower rate as a way to attract investors. These properties are also able to increase in value before completion, making the potential for capital growth much higher than with other investment types.
Are New Builds better than Old Homes?
There are many reasons why new builds are considered better than older homes. New build properties tend to be more energy efficient, have less need for repairs, and are easy to personalise. These type of properties also attract tenants who prefer being one of the first to live in a building.
While there are certainly advantages to living in a new build, that’s not to say that older properties don’t also have benefits. Older builds tend to be more spacious and have more history and character behind them.
One downside, however, is that these properties can require a lot of maintenance and repairs to get them ready for tenancy. If they haven’t already been refurbished prior to investment, investors will need to pay costly fees on these properties to get them up to scratch.
Important Questions to ask when buying Off-Plan Investment Properties
Before buying an off-plan property investment, you need to know how to identify a good developer, make sure the property will be created to a high standard, and ensure your funds are protected. You should also make sure you understand the buying process for off-plan properties.
Usually, off-plan properties are purchased in different stages, with a percentage of the overall cost being put down each time. Make sure you’re clear on the amount needed for each stage payment to avoid any issues.
All of our off-plan properties at RWinvest are developed by world-class companies with a track record for success. We’re available to answer any questions you have about off-plan properties and can guarantee that your funds will be safe throughout the entire investment process.
How to Decide
If you’re struggling to decide whether to invest in an off-plan or refurbished property, it’s important to keep your potential tenants in mind. Remember that a lot of tenants, particularly young professionals and students, will expect modern features and high-end appliances in a property, along with a well-designed layout. Many people are also becoming more conscious of living an eco-friendly lifestyle, which makes off-plan new build properties the better choice.
Many off-plan properties also allow potential investors to pay a deposit and then the full sum on completion, spacing out their costs over a longer period. Refurbished properties can offer a more unique investment, with design features that appeal to tenants, while off-plan properties can offer a more modern rental property with newer features.
One downside that comes with off-plan property investment is that investors may feel disappointed with the outcome of their purchase. To avoid this, be sure to make extensive enquiries before committing yourself to the investment. Here at RW Invest, we’re one of the UK’s top property investment companies when it comes to providing our clients with as much information as possible. This includes taking them on tours of the construction site and using virtual reality to give potential investors an idea of the finished property.
Make Sure You Get the Highest Rental Yields
When it comes to investing in property, a number of UK locations offer some competitive rental returns. Rental yields are assured by developers over a certain period of time, and often reflect a favourable location with strong tenant demand. Any investor that’s serious about making a lucrative investment should always understand what a good rental yield is.
How is Rental Yield calculated?
Rental yields can be calculated by taking the yearly rental income for the property and dividing it by the purchase price. Then, once you have this figure, multiply it by 100, and you’ll be left with your rental yield percentage.
What is a good Yield on Rental Property?
Anything above 5 per cent is generally considered a strong rental yield. Yields of 8 per cent or more are highly desirable and can be found in a number of key UK cities. The higher the rental yield, the stronger the cash-flow that will be available to the investor.
High rental yields are one of the first things that you should look for in a future property investment, as they ensure that your property can pay for itself and cover any extra costs like maintenance fees and ground rent. Rental yields are often linked to a property’s location or what type of property it is, so it is important you work out rental yields before investing. Rental yields are simple to work out and are a worthwhile endeavour if you are comparing many different properties, showing how quickly the investment can pay for itself.
Where are the Best Rental Yields UK?
Rental yields can be increased in areas where there is a substantial lack of property and high tenant demand. University cities often present the most attractive yields, as cities with big student populations like Liverpool, Manchester and Leeds offer some of the highest yields.
Some of Liverpool’s top performing postcodes for instance, including Edge Hill, Kensington and Fairfield, are located close to two of Liverpool’s universities. Student properties tend to make more rental income due to the high rents on purpose-built student properties, while residential properties can also generate some high yields.
In Manchester, a city popular with both students and young professionals, rental yields are strong in many postcodes and the city was recently hailed the best place to be a landlord by GoCompare. While these Northern cities are proving strong, however, London is performing poorly with four of the capitals postcodes ranking bottom for rental yields.
While rental yields are an important factor in choosing a property investment, high yields don’t always guarantee a successful investment. For example, you could invest in a terraced house in an area with attractive average yields, but find that the property struggles to attract desirable tenants and the house itself is difficult to sell. You need to take into account all elements of the investment, selecting a property that not only has strong yields but also is likely to grow in value due to capital appreciation in the area and will appeal to your target tenant.
How much Profit should you make on a Rental Property?
When owning a rental property, you should aim to make enough money to cover any costs like taxes and other expenses, while still generating attractive returns. The higher the rental yield, the more likely it is that you’ll make an attractive profit from your investment.
Look for Price Growth and Establish an Exit Strategy
Similar to rental returns, when trying to answer how to invest in property, UK price growth through capital appreciation cannot be ignored. It’s something all investors should look for in their chosen area of investment if they want to plan out a clear exit strategy for the future.
What do you mean by Capital Appreciation?
Capital appreciation refers to the increase in value on a property, and many UK property investments are experiencing such growth. Cities that are seeing heaps of regeneration are attracting more tenants and enabling the rising of property prices, and being aware of this is one of the best investment tips you can follow.
Certain areas of the UK have been experiencing major house price growth, and investors are benefiting from these across the country. Before investing, it is a good idea to look at what areas are performing the best in the UK house price index and choose a property that has the potential to rise in value.
House price growth is one of the main reasons why so many people choose to invest in property, and there are some serious opportunities to make significant amounts of money out of rising property prices. Research property price growth predictions to get a better sense of the regions and cities whose property market is expected to perform well. If you’re only interested in owning your investment property for a short period, finding out potential house price growth will indicate the best time to sell to maximise your returns.
What is an Exit strategy?
In property, an exit strategy is when an investor puts a plan in place for if they decide to sell their buy to let properties later in life. It’s important to establish an exit strategy before making an investment to ensure you get the most profit out of your venture.
Usually an exit strategy is used when an investor decides they want to retire from property investment. An exit strategy might involve selling all your properties at once, selling particular properties separately, or selling when you feel it’s necessary due to fluctuations in the property market. Whatever you decide, be sure to put research in to ensure everything runs as smoothly as possible.
What are the Key Elements of an Exit Strategy?
The key elements of a property exit strategy are to ask yourself how long you intend to invest for, determining your risk level, how you might exit, and who your most likely buyer will be. Research the different possible exit strategies to discover which one best suits you and your goals.
Like any other form of investment, it is important to think about whether you want to keep the investment for a long time or for a set period, with an exit strategy already decided. Establishing an exit strategy is important, as with any investment, and selling at the best time possible is a good way to ensure optimum returns and capital appreciation. By paying attention to the property market and understanding when a property has reached its maximum value, you can receive significant returns when exiting a property investment.
Contemplate a Management Strategy
Another aspect that you need to consider for your buy to let property investment is a management strategy. The best property investments always require a solid strategy, helping to give you clarity on the investment and ensure you’re taking things in the right direction.
Part of your rental property investment strategy should be whether you want to use a management company or tackle property management yourself. If you’re a beginner that’s wondering how to get into property investment and looking for some buy to let advice, read these tips about property management in our property investment guide.
What does Property Management mean?
Property management means to oversee the management of a property. Usually, property management is provided as a service where a property management company runs certain day-to-day tasks for property investors. This is perfect for buy to let investors who don’t want to manage the functional duties of the property themselves.
There are lots of reasons why you might choose to enlist the help of a property management company. One of the main reasons is so that you don’t need to worry about finding a tenant, leaving the property management company to do this for you. This hassle-free approach is popular with investors who want to take a step back from the functional duties and demands of buy to let property.
You will have to pay for an additional management service, but wouldn’t you rather spend more time expanding your portfolio than performing the day-to-day duties involved in running a property? This is the beauty of modern property investing.
Are Property Managers worth it?
Although hiring a property management company costs you money, it can be worth it for the time and hassle you save. Using a property management company leaves you more time to focus on your day-to-day life while still receiving a consistent rental income from property investing.
An established property management company will be used to managing the practical aspects of property investment. This includes arranging move-in dates, exchanging keys, and dealing with any maintenance issues. They can also help you with the legal side of property investment, like drawing up lease agreements and charging any fines.
Property management is perfect for investors who are far away from their rental property or for investors with a large portfolio. If you want to know how to invest in rental properties while maintaining your full-time career or other daily demands, a property management company is perfect for you.
Even if you choose to manage the property yourself, it is a good idea to have a solid property management strategy so that you don’t miss anything. The best way to invest in property is with a clear and detailed strategy for success, so create a plan for all areas of property management. The main things you need to think about are finding and managing tenants for your buy to let property, managing finances, and staying on top of maintenance.
How to find a good Investment Property Management Company
When looking for a good property management company for your buy to let investment, check their track record to ensure they have a strong reputation. Do your research to find out whether the company offers the property investing services you’re interested in, and whether their costs fit your budget.
We’re one of the best property investment companies in Liverpool and Manchester when it comes to finding our clients the most profitable investments in the UK for 2019 and beyond. While we offer our clients the best type of investment property options, we also offer them the chance to make a ‘hands-off’ investment with the help of many established property management companies.
We work with a number of reputable property management companies in Liverpool, Manchester and beyond. The companies we choose are experienced in dealing with property investment for beginners in the UK and can help you with all aspects of your buy to let venture. The companies we work with are also well established and equipped with the know-how and skills to help your buy to let investment run smoothly.
Integrate Tax Into Your Budget
If you’re interested in finding out how to start investing in rental properties, it’s so important to research the financial side of the investment. Tax is simply part of how property investment works, and so many people get carried away in budgeting for their next investment without factoring in tax.
Before you go looking for answers on how to become a property millionaire in a year or how to become a full-time investor, you need to think about taxes. There are several taxes which investors are liable to pay with property investment in UK locations.
You might be asking yourself — is property a good investment if I have to pay tax on my returns? Before getting carried away, however, you need to do your research and use a rental property calculator to work out just how much you’re likely to pay.
Property investors in the UK tend to find things relatively straightforward compared to other countries, like New Zealand which doesn’t allow foreign investors to purchase property in their country. Though taxes may cut into profit, if you purchase the right investment, the effects should be minimal.
Which Taxes will I need to pay?
The first is stamp duty; a tax paid on most buy to let investments. Student properties are exempt, but the tax is owed on residential properties with a purchase price of £40,000 and over. Once you hit the books on property investment stamp duty tax, you’ll also realise there are taxes that come with income and capital gains.
Income tax is a tax on the rental income earned from property, and capital gains is a tax payable on the profit earned upon the sale of the property. There are different rates applied to each tax, and it’s important to look into which banding you’ll fall into as an investor.
Aside from income tax, another cost that you need to consider for property investment in the UK is stamp duty tax, which depends on the price of the property you’re purchasing. If you’re wondering how to invest in property in the UK with no money for taxes and additional costs, use our stamp duty calculator which will give you a better idea of what you could be paying. Once you’re clear about the financial aspects of the investment as a whole, the better clarity you’ll have on whether you want to go ahead and find a buy to let property for sale.
It is also worth considering real estate investment options where stamp duty doesn’t apply, like student property investment which has become an increasingly popular choice. Tax policies are subject to change, and various governments have had different approaches to buy to let property investment.
How much Tax do you pay on Rental Income?
The percentage of tax property investors pay on rental income is largely dependant on the profit they make. For the tax year 2019/20, there will be a 40% income tax on rental income of £50,001 to £150,000, with a 45% tax on anything over £150,000.
While the amount you earn through property investing has a lot to do with income tax, your employment status also comes into play. For example, if you are a full-time landlord and use property as your sole means of income, you’ll be taxed differently than someone investing in buy to let property alongside their main career.
Do you pay Tax when you sell an Investment Property?
Property investors need to pay capital gains tax when they sell a buy to let investment property. The tax you pay when you sell the property will depend on the amount the property has appreciated by, and your income tax rate.
In the 2019/20 tax year, you don’t need to pay any capital gains tax on your property if you earned less than £12,000 from the sale. This is known as the annual tax-free allowance. Anything above this, and you will need to work out the tax rate based on your total amount of taxable income and your marginal rate of personal tax.
Contemplate a Buy to Let Mortgage
When it comes to investing in property for beginners, deciding how you’re going to pay for the investment is a big element to consider. For a lot of investors, using a buy to let mortgage seems the most suitable route to take.
If you want to know how to get an investment property when you haven’t got the entire immediate funds, you can opt for a buy to let mortgage to streamline the process. Similar to a regular mortgage, you can take out a loan on a buy to let property which will be calculated on its rental income.
If you’re interested in using a buy to let mortgage to complete your property investing journey, it’s wise to look around for the very best buy to let mortgage you can find. Make sure you shop around different banks and financial providers to get the very best deal.
Different providers offer varying interest rates when it comes to buy to let mortgages, which also depends on how much deposit you have and how long you want the mortgage for. It is important that you are aware of the process, finding out how much deposit is best for buy to let, and have everything you need to complete the mortgage application.
While using a buy to let mortgage is a good option for some investments, it’s not possible to do so with certain properties. With off-plan properties, for instance, it can be difficult to obtain a buy to let mortgage. This is due to timing issues, as most mortgage agreements are only valid for six months. If the development isn’t complete within this time period, the property investor will need to reapply for their mortgage which can be a lot of hassle. Since our investment properties at RWinvest are off-plan, we avoid these issues by requiring our investors to pay for their property in full, without a buy to let mortgage.
How much Money do you have to put down on an Investment Property?
If you’re using a buy to let mortgage to buy an investment property, the minimum deposit you need to put down is usually 25% of the properties value. If you’re not using a buy to let mortgage, you’ll need to put down a percentage of the property price as an initial deposit.
How much Money do you need to invest in Property?
To invest in property, you’ll need to have a good level of financial security. If you’re buying the property outright, you’ll need to have enough money to pay for the property in full. You’ll also need to put some money aside to cover taxes and any additional costs.
Always Conduct Thorough Due Diligence
Along with thinking about what property to buy for investment and the best area to invest in, it’s important to really be vigilant and make sure you’re making the right decision. This is where due diligence comes in — perhaps the most important of all property investment tips!
What does it mean to do Due Diligence?
Due diligence is an extensive process and investigation that should be undertaken before buying another company or asset. Before making a business decision, making an investment, or negotiating an agreement, you should do your research and take a responsible approach to ensure everything runs smoothly.
At RWinvest, we take due diligence seriously. All of the property management companies and developers we work with have to undergo things like questionnaires and background checks. This way, we can be sure that the companies we’re using are the best of the best, allowing us to offer our clients the most attractive properties and services.
How do you do Due Diligence on a Property?
Before buying an investment property, you should conduct due diligence in a number of ways. Take a visit to the property or property site, consider the surrounding neighbourhood, and think about tenant demand. You should also research the company you’re working with to make sure they’re reputable.
When wondering how to get into property investment in the UK, an important part of your property investor journey is to find an established investment company with an all-inclusive network. All developers, management companies, letting agents and many other participants in the property process should be examined before you jump in to buy to let waters.
Research the property investment companies that best align with your goals. For instance, if you’re looking for property investments that fit a certain budget and are in a particular location, this is a good way to narrow down your choice. Once you’ve found a company and investment opportunity you’re interested in, be sure to look at reviews and feedback from past clients to find out how successful and trustworthy the company is, and don’t be afraid to ask questions. At RWinvest, our Trustpilot and Google reviews can be given as evidence of our thriving track record for strong customer service.
Aside from the property company, you also want to conduct due diligence over the investment itself. When considering how to make money from property investment, you need to check that the property you’re investing in will generate the best rental yields.
Without high yields, you won’t make as much in rental returns as you’d like, which is why researching this should be integral to your rental property investment strategy. Thinking about where to buy an investment property for strong capital growth potential and high levels of demand is also important to consider, as these can both affect the success of your investment.
It is also essential you do your research and make sure you are able to responsibly invest in property and keep up any payments. Reliable property investment firms will always carry out due diligence to make sure that you can meet the financial commitments of property investment, but it is wise to do this yourself too.
Last but not least, it’s vital to run the numbers multiple times so you are sure your investment will pay off in the future. Look at what houses nearby have sold for, what the track record of the developer is like, and what type of tenants are looking for a rental property in that area. All of this information and more is available to you; it’s just necessary to do the extra research as you are investing a considerable sum.
Get Investment Property Advice From Experts
Once you’ve done your research and found out more about the world of property, it’s crucial to keep learning before rushing into your first investment. Along with reading our property investment guide, spend time speaking to a property investment expert who can offer you the right advice on how to get the most out of your property venture.
Where to get Property Investment Advice
You can get property investment advice by contacting a property company. Property experts within these companies can discuss different investment options, and advise you on the opportunities that fit your budget and goals. You could also talk to a financial advisor who will help you with the financial side of investing.
What does a Property Investment Company do?
Property investment companies help potential investors find the best opportunities and guide them through the investment process. Investing with a trusted property company means you can benefit from expert advice and impeccable customer service, and have the option to get help with things like property management.
Even if you’re a first-time investor who’s still wondering ‘what is property investment?’ or ‘how does property investment work?’, getting in touch with a property investment company like RW Invest will give you some clarity. Our dedicated property specialists can talk you through the investment process, and help you decide whether or not property investment is right for you. We can also provide you with useful know-how like how to calculate return on investment in property, and give you a tour of the property site and area of the investment.
Once you decide to invest with RWinvest, we’re with you every step of the way and are available if you have any questions or concerns. Our superb client care team are also dedicated to guiding you through the investment process, ensuring your venture runs as smoothly as possible.
Decide Between Furnished or Unfurnished
Deciding between a furnished or unfurnished property is not always something a buy to let investor puts much thought into. Without thinking about this, however, you could end up limiting the potential of your investment.
Along with asking yourself ‘what is the best investment property to buy?’ and ‘where is the best place to buy an investment property?’, one of the main components of how to invest in property is to attract tenants.
This is why we’ve included this section on choosing between a furnished or unfurnished rental property as one of our tips for investment property purchases.
What is the Difference between Furnished and Unfurnished?
In a furnished property, the property comes with necessary pieces of furniture such as a sofa, bed, and dining table. Unfurnished properties don’t have furniture included, but usually they come with white goods like a fridge and washing machine. Sometimes, properties are offered part-furnished, with just a few pieces included.
While you’re under no obligation to furnish your rental property, there are times when doing so could benefit you. Some tenants prefer moving into a property that’s furnished, as they don’t want the added hassle of buying their own furniture.
Students and young professional tenants tend to fall into this category, as they favour the convenience of being able to move into a property that’s fully equipped with everything they need. If the furniture included in the property is modern and stylish, this is an added bonus that should attract even more demand. If you want to know how to become a landlord or investor who attracts tenants and keeps them happy, offering a furnished property may be your best bet.
For tenants who are wondering how to buy a first investment property and make it a success, providing furniture can be a good way to point the investment in the right direction. A selection of our properties, such as our Liverpool Fabric District Residence, offer clients a free high-spec furniture pack for their property. Our properties tend to attract young professional tenants who are likely to appreciate a fully furnished rental property, so opting for a furniture pack can be a good way to boost demand.
On the other hand, certain tenants prefer to put their individual stamp on a rental property and see buying their own furniture as an easy and flexible way to do so. Some tenants might be moving from another rental property in which they owned their own furniture, and will, therefore, need a new rental property that will accommodate these items.
All in all, a property investors decision on whether or not to furnish their buy to let property is entirely their own. If you’re unsure which route to take, consider offering some flexibility with your property’s furnishings, allowing your tenant to negotiate an arrangement that suits them best. This could mean the option to temporarily store the properties furniture if your tenant wishes to furnish it themselves, or allowing the tenant to buy your existing furniture off you and replace it with their own.
What should a Landlord provide in an unfurnished Property?
In an unfurnished property, the landlord is usually expected to provide white goods such as a fridge, freezer, and other kitchen appliances. Some tenants will also expect curtain poles or blinds to be fitted, along with extractor fans. Think about items which will be mutually beneficial for both yourself and the tenant.
For instance, extractor fans can help prevent mould growth in moist areas, avoiding further costly repairs in the future. Fitting things like curtain poles can also benefit you as you can be sure the job is done correctly, rather than leaving it to your tenant who may end up causing damage.
There are advantages to both furnished and unfurnished when it comes to property investing. Some of the biggest benefits of offering a furnished property are that you might be able to find tenants more quickly and easily, and then once the tenancy ends, you have the choice to either use the furniture in your own home or leave it for the next tenant.
If you decide to take the unfurnished route, you could find that tenants stay longer as they’ve spent time and money furnishing the property and making it their home. You also don’t need to worry about any damage being made to the furniture as it belongs to your tenant. If you choose to offer your property unfurnished, keep in mind that all of our investments at RWinvest come fitted with white goods, meaning you don’t need to factor in these additional costs.
Find Out How to Boost a Properties Value
We’ve covered the importance of capital appreciation, but what about the things you can do to boost the value of your property?
House price growth plays a big part in the type of returns you could see once you choose to sell your investment, but there are also a number of ways you could add value to the property yourself.
How to boost your Property Value
Some of the most popular ways to boost your properties value include redecorating, replacing old windows and fixtures, and creating an attractive garden or outdoor space. You should also take care of any damp or structural issues, and consider installing high-quality central heating systems.
The direction you take in boosting the value of your property depends on the type of investment you’ve made. If you’ve purchased a new build, for example, you won’t need to do as much work to get the property up to scratch as you would if it were a period property.
As previously mentioned, our investment properties at RWinvest are mostly off-plan, making them a new-build once completed. If you want your off-plan property value to be increased, one way to do this is by picking and choosing the most attractive units. Investors can often get first pick of the different units available, allowing them to invest in the most spacious properties or ones that have popular features like a balcony.
Which Home Improvements add the Most Value?
Home improvements that add the most value to a property include fitting a new kitchen and bathroom, converting the loft or garage, adding a conservatory or extension, and updating the flooring or carpets. Improving the exterior of the property can also help, boosting value while also attracting more potential buyers.
Again, it may be difficult to make these home improvements in certain properties. In an apartment, you can’t do any major structural works like you could in a house such as adding an extension. You can, however, use decorating to your advantage, along with updating fixtures and fittings.
If you own a new-build property which is beginning to look a little worn out and in need of a refresh, decorating is the perfect home improvement to add some value to your property. Replace old carpets or flooring, re-paint walls, and give each room a perfect finish. Any major issues like damp or mould should be resolved as soon as possible, along with updating the electrics and making sure the plumbing and central heating is working correctly.
Since apartments don’t tend to have a private garden, the best thing to do is to make use of balcony space. A lot of our properties come with private balconies included, and so focusing on this area is a good way to boost your off-plan property value further. Add some garden furniture, details like an outdoor rug, and some colourful plants and flowers to help your property stand out and hopefully increase in value.
How do you maximise Rental Income?
Along with growing the value of your home in terms of capital gain, there are also ways to maximise your rental income. Renovations like painting and redecorating your property and upgrading the kitchen and bathroom can allow you to set higher rental costs, boosting your overall monthly income.
Part of the reason why our buy to let properties offer such attractive rental yields is that they’ve been decorated and designed to a high standard. We decorate our properties with high-quality flooring, state of the art kitchens and bathrooms, and minimal colour schemes to appeal to a wide range of tenants.
So how do you maximise rental income in a modern and well decorated new-build apartment? Of course, once you own the property you’re free to redecorate if you think this will help grow the value further. Offering the property fully furnished can also allow you to demand higher rental costs while attracting more tenant interest.
Consider Expanding Your Property Portfolio
Even after you’ve learned how to get started in property investment and made your first purchase, the next thing you might want to think about is how to build a property portfolio.
This is one of the most crucial property tips and property investment ideas to consider if you’re serious about making big returns from your investments, and a good strategy to contemplate if you want to start investing in property for the long term. So what exactly are the benefits of owning more than one rental property, and how can you buy more property and grow your portfolio?
How do I become a Successful Property Investor?
To become a successful property investor, one of the best pieces of property investment advice is to grow a diverse portfolio. Having a property portfolio that’s made up of a variety of different property types can help you minimise risk and significantly increase your cash flow.
Successful buy to let investors will have studied the housing market and established a clear vision on which locations offer the best returns. This way, when building a wider portfolio, they have a better knowledge of the best property investments to benefit them.
Can you get Rich by Investing?
It is possible to get rich by investing in property, provided you take all the right steps. If you want to make your money go further, building a property investment portfolio can be effective. While property won’t get you rich overnight, it can boost your income and even become a full-time career.
How do I grow my Property Portfolio?
In order to grow a property portfolio, you need to have some prior experience with buy to let investment. Beginner investors should start small and gradually begin purchasing more properties. Consider buying a mix of different properties in various areas to diversify your portfolio.
When selecting any new additions to your property portfolio, seek out opportunities that differ from your existing investment. For instance, if you own a student property in Liverpool, invest in a residential property in Manchester. This is a good way to protect your property portfolio from any market changes. You could even consider venturing out of the UK and buying properties in different countries to diversify your portfolio even further — just be sure to do thorough research beforehand to find out how to build a property portfolio that works in your favour.
So just how can you buy more property and grow your portfolio? Making sure you choose an investment that offers the potential for attractive rental returns and strong capital growth is one of the best investment property tips. This way, you will have acquired more money to use on further investments to add to your portfolio.
A summary on how to start property investment
So, now that you know how to get started in property investment, here’s a summary of our 17 top property investor tips on investing in property for beginners:
1. Consider investing in the UK property market
2. Choose your buy to let strategy
3. Understand what the investment involves
4. Make sure you know the risks
5. Research the best locations
6. Get to know your tenant
7. Weigh up off-plan vs residential
8. Aim for the highest rental yields
9. Look at capital growth and creating an exit strategy
10. Think about your management strategy
11. Include the cost of taxes in your budget
12. Think about buy to let mortgages
13. Remember to conduct due diligence
14. Seek expert investment property advice
15. Decide between a furnished or unfurnished property
16. Think about ways to boost your properties value
17. Consider building a wider property portfolio
Still looking for Answers?
So you’ve made it to the end of the RWinvest complete beginners guide to property investment and found out the most important things to know about how to start investing in property.
We hope that our tips on property investment for beginners in the UK have helped you grow your knowledge and given you the confidence to get started with your investments. If you’re still unsure of some things and struggling to choose the right investment for you, go ahead and contact us for a helpful chat with a member of our team. You should also make sure to stay up to date with all of our latest news and guides in our buy to let news section, offering plenty of property investment tips for UK investors. Good luck!
One Baltic Square
Voted Coolest Place to Live
7% NET Rental Return
£190m Baltic Triangle Regeneration
Reliance House Studios
Premium Studio Apartments
7% NET Rental Return
New Luxury Property Investments
7% NET Rental Return
Cherry Pick New Units