Investing in property is not always easy. It’s time consuming, costly and can be difficult to get started with, as you require a decent amount of upfront knowledge to ensure you are entering the investment field with strength. This post offers some of the basic steps that can help you get started.
Determine your monetary goals
Before you embark on the investment journey, you should have some ideas about what you want to be achieving. Clearly state the goals, which should be specific and achievable. For instance:
- To realise a cash flow of £ 500 per unit per month
- Invest at least £10,000 per year
If your plan is to retire with a cash flow of £ 5000 per month, it means you should invest in at least 10 units. This way, you will comfortably retire and be guaranteed of a steady income that will keep you going.
Of course good goals are those that meet the S.M.A.R.T. criteria.
S – Specific
M – Measurable
A – Attainable
R – Relevant
T – Timely
Do location research
Depending on the goals you have set, you need to be careful when choosing the property to invest in. The key is to research areas which might best help you realise your goals, and getting to know these local markets more intimately. This might require you to speak to local estate agents, or other investors in the area. Sites like LinkedIn often have groups dedicated to investment in a particular area. Engage with these communities to start learning about where to invest. Here are a few things to initially consider:
- School catchment: if the area is within a good school catchment, family houses would be ideal. This will be important to family tenants and they’ll be willing to pay more than single tenants but of course the property will also be more expensive.
- Demographic trends: this is the most important factor the investor should look at before outlaying his cash. The rate at which the population grows determines the rate at which the property will appreciate in value.
- Rent rates: Check with the agents in that area and gather some information on the prevailing rent rates.
- Transport: is the area served with public transport? How far is the nearest train / tube station and how easy is it to access the nearest city?
- Internet options: Check the internet provider that serves the area. How efficient is the provider? This will be relevant to potential tenants.
Determine what kind of property best suits your needs
Decide whether you want a single tenant / family or HMO’s. Make some choices about just how much land, how many bedrooms, the conditions and more of the ideal property. Do you want to buy cheap and renovate? Do you want something ready for tenants to move it? Once you define characteristics, you can hone your efforts to search for the right property.
Determine your financial requirements
Find out how much capital you have on hand, versus how much you need to raise for the initial investment outlay. If you are financing the project through lenders, this is the right time to find out what the lenders require before they finance the kind of property you are interested in. Avoid doing things the way most investors do; sealing a deal and then going out there to find lenders. It is recommended that you secure financing before you start looking for your dream deal. It is possible that you may not be able to secure funding from a traditional lender. This should not worry you. You can approach a private lender. These are individuals with money that is specifically meant to be lent to property investors. They charge a higher interest rate and may structure the deal to their convenience.
Consider a joint venture
If you do the maths and find you won’t be able to make a loan or upfront mortgage worthwhile for the kind of investment you’re interested in, it might be worth considering a joint venture. Talk with other investors on the possibility. They can assist in putting up the money and benefit from the profits each month. Your work will be to find a great property, get tenants who pay, manage the renovations and basically manage the investment. Even though you will not make as much money as you would if you found a financier, it is one of the methods that can help new investors gain the real estate investment experience.
Find a good real estate agent or property sourcer
We’ve got a great post about how to find a good real estate agent and property sourcer. These options are distinct, but are two ways of finding good properties which fit your needs. Ensure that you use an agent or sourcer who specialises in investing in property in the area of your choice. If you choose on an agent who does not operate in the area of your choice, chances are that he may waste your time or lead you to a bad deal.
Make an offer
Once you have followed our tips on a good estate agent, and the best ways to make the most of your property search, you can start engaging the process to actually purchase. This is a very critical point because it marks the end of a long journey. Remember if you work hard, do your research, secure finances but don’t make an offer, nothing will happen. After all, the worst thing that could happen is for the seller to turn it down. Nothing more! If your offer is accepted, have your inspection team on the ground to ascertain the facts and determine if there is any quality issue that can make you back out before you outlay your hard earned money.