Property investment has a lot of attractions. One of the most obvious is that, by definition, it’s backed by a tangible asset and that asset comes without the security implications of storing precious metals and such like.
On the other hand, property generally comes with a much higher up-front-cost than precious metals, which can initially be bought in much smaller quantities. It therefore pays, literally, to understand the fundamentals of property investment and adhere to them at all times.
You’re buying for other people rather than yourself
There are basically two ways you can choose properties. One is to look for properties which are within your budget and which offer value/potential and then think about what sort of person would want to live in them, how much they would be likely to be willing/able to pay and whether or not it’s likely that you’ll find that kind of person in that geographic area. The other is to think about the sorts of people who live in a given area and then look for properties in which they would want to live. Whichever approach you use, the key point to remember is that you are buying for someone else and need to think about who they are and what they would need and want, which is very different to buying for yourself, when you only need to think about what they would need and want.
You need the right type of home as well as a home with the right features
This is essentially analogous to the point above, but we wanted to make it clear and we thought an example would help to illustrate it. Let’s say you have a spacious, two-bedroom property with parking and great public-transport facilities nearby. That’s the sort of property which could appeal to a number of tenants. Now, if you add in a garden, you increase the appeal to families and retirees, but may well reduce it for young professionals and students, neither of which may want to have to maintain it. Take away the garden and put the property up some stairs and you have the opposite situation. In other words, you need to think about the type of property itself, as well as its features.
Local knowledge is a must
You may have heard that property in the north of England is performing much better than property in London and that Birmingham and Manchester offer particularly attractive returns. The key word missing from that sentence, however, is “overall”. Birmingham and Manchester are both large cities, which means that there are different sub-markets within them, just as there are different sub-markets within London. There are still parts of London which do offer a lot of potential and value for property investors (basically any area likely to benefit from Crossrail is likely to be at least worth a look). It does, have to be said, however, that even London’s up-and-coming areas are likely to be more expensive than parts of the north of England which are already offering solid returns to investors, hence your investment budget will probably go a whole lot further in the north of England.
You need basic maths skills (or help from a financial professional)
Investing is a numbers game and when it comes to property investing the numbers can get very large very quickly. These numbers include your tax liability, which needs to be factored into calculations right from the start. If maths was never your strong point, then it’s a very good idea to get help before you make your first purchase.
You need to understand that property is a long-term investment
There are some people who specialize in “flipping” properties, basically buying properties in need of renovation, undertaking the renovation and selling them on quickly, but this is a niche area and is more complicated than this description may have made it sound. Generally, however, property is best viewed as a long-term investment.