How can you avoid bad property investments and making the right decision in the long run.
Before we start, you need to know one thing: it is easy to make a bad investment.
All investors have done it at some point… picked a property believing it to be a sure thing, only to fall into negative equity when the property does not produce enough rental income to pay off the mortgage. It is nothing new, but you can now prevent it.
And the key to overcoming a bad property investment? Knowledge.
It is important to develop an awareness of your market; an understanding. Above all else, you need to acquire the right tools to make your property investments work.
Would you believe that the majority of investors pick the wrong properties? That the types of properties you would generally think would generate you an instant high profit are in fact the wrong ones? It’s true. But it doesn’t have to be this way.
If you’re interested in building up a portfolio in the private rental property sector, there are a few simple tips you can follow that will make a real difference to your investments:
· Invest for the long term – tempted to buy, do up and sell? Don’t. In fact do the opposite… buy to rent.
No matter your age, part of your portfolio should be allocated to investment growth. This ensures that when the property market fluctuates – which we know it will – you can benefit from the rapid increase in house prices, whilst establishing an easy tenancy.
You also need to plan ahead. Selling a property may give you an initial profit, but through buy-to-let, you will always have a tenant waiting to feed your income.
· Research – know your investment market. The common mistake many property investors make is not knowing the real value of their property. They invest without thinking, purely on the belief that property equals profit. They forget that by picking the wrong property, they could lose out on money.
So check your tenant’s criteria. See if there is a rental demand in the area. Run over the figures and do the maths. Plus make sure that there will always be a positive cash flow from your property investment. If its monthly income falls below £500, move onto the next property and start afresh.
· Diversify – most property investors’ focus on the residential market. After all it is currently worth £500 billion, but there is more to the property market than following the traditional route. From commercial properties to single and double let, you can now even invest in hotels!
And consider the market abroad. It may feel far away, but take a look at the papers. Daily there are reports of falling house prices in the US, Spain and Australia. And with many house prices falling at 40% below value, you too could gain easy profits and take advantage of their non-existent stamp duty.
Just make sure you do not put all your pennies into one pot. To invest in one property alone is a risk, especially if the property falls through. So expand your property portfolio and broaden your investment horizons.
· Start off small – if you’re buying into real estate, start by investing in properties that are smaller and more affordable to begin with – whilst ensuring there is a tenancy market to sustain it.
Be wary of putting all your money into one large property.
You could make a much larger sum of money by placing your investments within a range of options.
Make property investment your ally.
With a little hard work and an open mind to begin with, you too could soon be feeling the benefits of the current property rental market and be making an easy profit of over £500 per property, per month. It’s simple.
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