Property Investment Pitfalls & How to Avoid Them [2024]

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How to Avoid Mistakes in the Property Market in 2024

Property investment in 2024 is already looking like a more promising prospect than it was 12 months ago. As an enticing opportunity with the potential for lucrative returns, the buy-to-let market has managed to overcome a subdued year due to high inflation and interest rates.

However, investors must also heed the pitfalls of property investments if they want to maximise their buy-to-let returns. Thorough research and strategic planning are paramount, helping limit financial risks and ensuring informed decisions.

Let’s look at some of those pitfalls in more detail.

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Performing Inadequate Buy-to-Let Market Research

While 2023 was a subdued year for property investment, 2024 has started on a more confident footing.

Affordability is returning to the market, and house prices have increased month-on-month four consecutive times (according to the Halifax House Price Index), reaching 1.3% in January. This represents a 2.5% growth since January 2023 – the highest annual rise for 12 months.

But that does not mean investors can just rush back into the market and purchase a property anywhere, expecting to make a profit.

Certain areas in the UK have much higher property values than the national average, such as London. The capital has an average property price of £727,023, according to the latest figures HM Land Registry UK House Price Index. The national average property value currently stands at £284,950.

While rents may be higher in London than in the rest of the UK, the astronomical property prices mean rental yields remain low in the capital. Coupled with higher mortgage costs, increased energy bills and a desire among tenants to move away from the capital due to financial constraints, it is easy to see why many buy-to-let landlords choose to look further north once they’ve done their property market research.

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Not Keeping Up-to-Date With the Latest Forecasts & Analysis

While investors can perform all of their market research by searching property listings on all the notable portal sites, they will miss out on crucial information regarding UK property investment if they do not keep up to date with expert forecasts and analysis.

Savvy investors will consult insights from the likes of Savills, HM Land Registry, the Bank of England and other authoritative sources for guidance on their approach.

For instance, Savills released its cross-sector forecast at the beginning of January. In that report, they pinpointed the North West buy-to-let market as being able to exceed 8% returns for 2024 – expecting 9.2% over the next 12 months.

These types of forecasts can help investors focus their search on potentially lucrative areas that are expected to do well in the buy-to-let market.

Read More: Wondering if buy-to-let is still worth it? Our detailed library of investment resources explores the current state of the market, as well as trending investment strategies and capital growth projections!

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Failing to Understand Tenant Demands & Property Trends

It is one thing to know which area to invest in, but buy-to-let investors also need to ensure they know which type of properties are likely to attract the right tenants.

For instance, a recent Shawbrook Bank study showed that buy-to-let landlords have seen a rise in popularity among city centre apartments due to more people returning to office work after a prolonged period of remote work. In addition, the same study showed that investors expect the city centre apartment market to remain a lucrative investment opportunity.

Further Reading: Learn what to look for in a buy-to-let property and how to calculate rental income with our updated property insights!

Failing to Consider Different Investment Strategies

While many buy-to-let investors are happy to scroll through the portals until they find a suitable property, some do not think about trying different avenues of property investment, such as off-market and off-plan investments.

With higher borrowing costs, off-plan property investment could suit your investment needs if you want to save capital and increase your portfolio.

Off-plan investment involves purchasing property directly from the developer before it has been built. These properties are discounted and can be bought below their actual value. This allows for instant capital appreciation as they grow in value once completed.

In addition, these properties will also comply with the latest EPC regulations, ensuring greater energy efficiency and, as a result, being more cost-effective. With tenants looking for more energy-efficient properties to save money, a strategy that sees you invest in off-plan property could prove to be a shrewd investment in the right location.

Delve deeper into the UK buy-to-let market with our comprehensive buy-to-let area guides:

Author

Dale Barham

Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.