Investing in property can be lucrative, even for inexperienced investors. As with any type of investment, there is no sure-fire way to success. Whether you’re investing in property, commodities or stocks and shares, there’s always an element of risk. Thankfully, by conducting thorough research, defining your goals and working with experts, you can often reduce your investment risk. To help any first-time investor, we’ve put together our top 5 tips for investing in property.
1. Employ a local agent or buy-to-let specialist
When looking for the right investment property, it may be worth employing a local buy-to-let specialist to advise and source investments, plus they could even save you money.
Not all residential property on the market is suitable for investing. A local buy-to-let agent with in-depth knowledge of the area, will be able to advise you on the type of property you should consider. They can also advise on the best type of tenants to attract, how much rent you could expect and even estimate your capital returns over 2-5 years.
2. Do your maths and be realistic
The size of your investment will be the driving factor to your buy-to-let property and doing the maths is key to a successful investment.
Firstly, we recommend you review your personal finances and decide how much you can afford. Then, secondly, consider and calculate all the outgoings for the property. These will include but not exclusively, property maintenance, landlord insurance, and appliance safety tests.
Based on the investment calculation, decide what monthly return you would require to cover your expenses and provide you with a good return. If you’re a mortgage investor, lenders typically require your rental return to cover 125% of the property’s monthly outgoings.
Armed with this financial information and parameters, a good buy-to-let agent will be able to advise on the type of property for you.
3. Don’t be too ambitious
The most important advice we will give is don’t over stretch yourself financially. Start off small with a portfolio of one maybe two properties, then once you become more experienced, expand your portfolio and investment to a level you’re comfortable with.
When investing in property, your key rate of return is your rental income minus your property expenses. Our property experts recommend investing for rental income rather than for capital growth. Capital growth cannot be guaranteed but securing a buy-to-let property on a medium to long-term investment will maximise rental profitability.
4. Consider how ‘hands-on’ you want to be
As a new buy-to-let investor, you will hear the terms, ‘managed property’ or ‘let only property’ and you will need to decide what option is best for you.
A managed property allows the landlord to take a step back from the day-to-day running of the property, while the agent manages everything. The service ranges from and covers keeping the property fully let and finding new tenants, to arranging legal documentation, regular inspections, maintaining or repairing the property and everything in-between. The property management agent will charge a monthly fee for this service but as a new investor this will remove all the headaches you may endure.
With a let only property, everything is handled directly by the landlord including collecting rents, securing holding deposits, dealing with legal issues and responding to 24-hour emergency call-outs. A letting agent can be instructed to find new tenants for your property but will charge the landlord a tenant finder’s fee. The benefit of a let only property is landlords receive the full rental income.
5. Buy modern properties in good condition
Many first-time investors will have watched countless property programmes where people have purchased cheap run-down buildings, worked on them and turned the property into a profit. Although this may look easy, these investors are usually very experienced in this line of work and often own construction companies. They will know exactly what to expect and how to overcome any structural or planning issues. As a first-time investor, it is advisable to look for good quality, modern properties which need little or no work to be inhabitable. This will allow you to start earning income from your property straight away, whilst reducing the headache you may experience with contractors, building regulations and spiralling material costs.
If you’re a first-time investor and want to know more or an existing landlord looking for new properties, we are the experts in buy-to-let and offer impartial advice for our investors. For more information on buy-to-let, visit www.philipjames.co.uk or call 0161 828 8200 and speak to an advisor
Philip James is the leading independent estate and lettings agency in Manchester. With five branches and two area managers, Philip James covers some of Manchester’s most popular residential areas including Didsbury, The Heatons, Manchester City Centre, Salford Quays, and Denton.