Property Investment
It is common for an individual to boost their income by investing in real estate. While this can be a smart financial move, it can also be a lot of time and money so how do you know It’s for you?
In this article we talk about the considerations, pros and cons of making a start in property investment.
Considerations
Before you get started it’s important to understand the risks involved in the investment and your financial situation.
There is a lot of upfront costs involved in property investment, so you need to thoroughly assess your financial situation going in. A couple of things you may want to ask yourself being:
Can you afford to cover a deposit and mortgage payments?
Can you afford maintenance?
If anything goes wrong can you afford to repair it?
Seeing a financial expert to audit your finances from income and savings to debt can tell you about your financial steadiness. The stronger your finances, the easier it will be to weather real estate challenges.
Before you make your decision, you should think about what your goals are for this investment. You can start by doing some financial planning:
Generating income
Will you make income from renting to tenants, holiday homes, renovating etc?
Money goal
How much do you want to make and in what time frame?
What to do with the extra income
Do you want to fund retirement, gain financial freedom or do you have another plan for the money?
Are you planning on growing your portfolio?
Are you hoping to build a large investment portfolio or just manage one or two at once?
Considering these factors can help you decide how you want to go forward, this can help you line it what is realistic with your finances and plan a long term strategy.
It’s not just about the money, there is a huge commitment involved in property investment. Any kind of property investment requires significant time and management. If you already have a busy schedule can you fit in the extra responsibilities like maintenance, providing a safe home up to all the standard needed before renting it out.
Before diving in head first you should carry out significant market research. Look at current prices and mortgage rates and see what works best for you. Keep an eye on market trends and consider if now is the right time.
Recent forecasts from real estate website Rightmove predicts house prices in the UK to drop by 1% in 2024 which is good news if your budget is limited. Changes in interest rates means the cost of mortgages should also come down. Statements from the Bank of England governor Andrew Bailey also suggest this will persist as UK inflation gets closer to it’s aim of 2%.
Higher property taxes introduced in 2023 meant that the profit potential was lower for property investment leading to more landlords letting go of their buy-to-let investments. This evolving situation means choosing the right time is important. You can get help with this from property experts and financial advisers to help make well informed decisions.
Diversification
Investing across different types of property and location means you are safer from fluctuations in the market on your portfolio, for example if the market in one specific area of the country worsens you still have other locations to fall back on. These extra income streams also boosts your returns and gives you a stronger financial position.