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17 Oct, 2023

Top 5 Property Investment Mistakes You Need to Avoid

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    Avoiding the Most Common Property Investment Mistakes

    Property investment can be a profitable venture.

    However, you’ll want to ensure you do not make rookie mistakes if you’re a first-time investor.

    2023 has been a tempestuous time for the housing market. However, buy-to-let investors could grow their capital considerably, provided they know how to implement a strategy.

    Today, we’ll look at the current housing market and help investors avoid common pitfalls.

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    Failing to Research the Best Buy-to-Let Areas

    All the best buy-to-let locations are different. Each town, city and region has its own average property price, growth potential and rental yields. Understanding these figures is essential to implementing any property investment strategy.

    For instance, let’s compare the United Kingdom with a good-value area like Liverpool.

    HM Land Registry puts the average UK house price at £289,824. However, Liverpool only has an average house price of £177,224. As an investor, you need to be looking out for good-value properties. As such, Liverpool would represent a better value investment than average.

    Considering rental yields, the average rental yield in the UK is around 5.2%. However, parts of Liverpool have yields that exceed 8% – some places go even higher.

    Investors also need to research capital growth. If you are new to the term – capital growth is the rate at which your property increases in price over time. Savills predicts the UK will see a 6.20% rise in capital growth. On the other hand, the North West is expected to enjoy almost twice as much capital growth at 11.70%.

    By keeping these figures in mind, investors are less likely to invest in an area that offers a meagre ROI.

    What is capital appreciation?

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    Not Thinking About What the Tenant Wants

    Many property investors need to consider what they would like in a rental property. Instead, they must think about whether a prospective tenant would want to live in their property or area.

    For instance, choose a city with a large student population if you want to invest in student property. Suppose we use Liverpool as an example again. That city is popular with students, thanks to multiple universities. In addition, the city offers plenty of trendy pubs and a thriving nightlife scene. In fact, according to Student Crowd, Liverpool was voted one of the best cities for students.

    In addition, a recent easyMoney study showed that the area surrounding Liverpool John Moores commands some of the best rental yields in the country – around 8.9%. In contrast, the national average rental yield is 5.2%.

    The yield is so high because properties in that area are in high demand among students and young professionals. Homes are close to the university and close to city centre amenities.

    Families, young professionals, students and retirees will all want something different from their neighbourhoods and homes. These are the things investors may want to consider before settling on a location.

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      Failing to Think About Long-Term Property Investment Potential

      Currently, the cost-of-living crisis has led to slow property growth. As such, many investors may be convinced to sell. However, it is important to keep an eye on the forecasts.

      For instance, Property Reporter recently detailed how the average property price won’t reach £300K until 2025 the earliest. If investors sold now, they wouldn’t see their property value appreciate as much as it could.

      Many things affect the long-term potential of a buy-to-let home. Keeping an eye on capital growth projections (as aforementioned) and local trends, such as regeneration efforts, can help you understand your property’s long-term valuation projections.

      Look at Manchester. Over the last decade, Manchester has enjoyed plenty of regeneration and investment.

      As such, property prices grew by 67.97% between 2011 and 2021, per HM Land Registry.

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        Underestimating the Cost of Property Investment

        Make no mistake about it – property investment is expensive.

        While property investment can result in substantial capital growth, however, once you own a property, you also need to consider maintenance expenses, void periods and other fees. Investors should factor these into their costs before diving into any property investment. Essentially, you need to be able to afford a buy-to-let investment on top of your own home.

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          Trying to Do Everything By Yourself

          The biggest mistake any buy-to-let investor can make is trying to do everything themselves.

          When you consult a property investment company, you get help and advice from experts who have worked in their buy-to-let sector for years, allowing you to make better-informed decisions.

          In addition, you’ll often get access to properties and deals unavailable elsewhere on the market. Investors who choose property investment companies can buy off-plan buy-to-let homes, usually at a discount, with fantastic potential for greater capital appreciation.

          Also, savvy buy-to-let investors often choose property management companies to help with the day-to-day tasks involved with tenancy. This will ensure a smoother relationship between landlord and tenants and compliance with the most recent tenancy regulations, resulting in a more hands-off investment.

          Stay in the loop with RWinvest. With up-to-date analysis and statistics, our news team have created some useful guides, covering everything from Coventry Property Investment to Birkenhead Property Investment.

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          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.

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