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Golden Rules of Property Investment

by Alison Feemantle

People have been investing in buy-to-let property for years, nothing new there.  For centuries tenants have been renting from landlords, but it’s only been recently that the average ‘man on the street’ has had unprecedented access to finance products to use for investment purposes.  Until the credit crunch bit, lenders were practically falling over themselves to provide buy-to-let finance.

However, since the economic downturn, the cost of buy-to-let finance for lenders has increased dramatically.  Lenders are now reviewing their lending criteria so that only those cream of the crop investors get the best deals.

If you are serious in investing in property and you have the finances to do so, the market is still viable, but you should review our golden rules of property investment before you start.

Research is King

You wouldn’t buy a car without knowing the make, model or mileage and the same principles apply to property.  Even more so!  Research your market thoroughly including the area you are thinking of buying in, any regeneration plans, the local transport links, and also other amenities such as schools and shops.  Any property 10 minutes away from transport and local amenities is a safe bet!

Location, Location, Location

Consider who your ideal tenants would be.  You need high quality locations to attract quality tenants.

How to Buy Well

When purchasing a property, consider content and price.  This could save you money in the long run if white goods and furnishing could be included in the price too.

Make the Numbers Work

Buy a property that supports capital appreciation.  Make sure you include all the costs involved in the property purchase including legal fees, service charges, stamp duty, contingency and ground rent so that you can afford any void periods that occur between tenancies.  Many people ignore these costs and it can be a catastrophic mistake.

Use the Right Advisors

It’s essential that you use good mortgage and letting advisors.  A regulated advisor will ensure you have access to the best deals that are free from any fees and which operate in alignment with your investment plans.  A good letting agent will work to keep void periods to a minimum.

Don’t Expect to Get Rich Quick

Property investment needs to be approached with care and patience.  This is a long-term investment opportunity.

Supply and Demand

Speak to local agents to see what is particularly needed in your chosen area.  This will help you to meet the need and to attract tenants easily.

Head Not Heart

Don’t be ruled by your heart when making decisions.  If you are not going to be living in your investment property you should only furnish and decorate it to a clean and basic standard unless you want to attract high end professionals.  Speak to local agents to understand the quality that is expected.

Avoid the Gimmicks

Be wary of any deals offering incentives, such as no money down for example.  Also, so-called get rich quick schemes should be avoided like the plague.  A few years ago these might have been worth a punt, but not right now.

Keep Pricing Real

Never pay over the odds when purchasing an investment property.  You should never pay up-front fees, finder’s fees or commissions prior to completion.

In summary, your aim should be to find a property that generates long-term wealth.  There are many solid investment opportunities out there for those with the finance available.

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