With unemployment levels rising, more and more people are looking for passive income opportunities to support their future finances. Enthusiastic millennials and Generation Z have many options when it comes to investing, but property investment is considered one of the safest ways to invest money, and they have plenty of time on their side to watch their investments grow.
As a tangible asset, property investment is a favoured choice among investors instead of stocks and shares. You can see and live in a property investment and know that it will be there for a long period of time. It’s also considered a lucrative investment as people will need places to rent and live, and so it can provide the perfect income for the future.
However, with any investment, it’s essential you carry out the appropriate research beforehand. Whilst the stock market is seen to be more volatile, investing in property requires an initial downpayment and will have your money tied up for several years.
Before making any decisions, we’ve put together these top tips to consider and ensure that it is a suitable investment for you.
Due Diligence
Before making such a big commitment, it’s worth doing some research. Property due diligence is the task you should carry out prior to making a purchase. You need to evaluate a potential investment to understand how much money you could make, but more importantly, to weigh up the risks involved.
Finding out all there is to know about the property market will ensure you’re making informed decisions to secure your investment and buy the right property for you. If you’re looking to purchase a buy to let property, for example, and rent it out, then you will need to consider the key areas where tenant demand is strong. Making good decisions at the start should provide you with passive income for years to come. Put in the effort beforehand, and generate income with little to no effort in the future.
Look at previous market reports for the areas that you’re looking to invest in. Property investment companies often publish content on housing market predictions and expected rental yields on properties in the best locations. These are all things you should be researching if you want consistent rental income and your property to increase in value over time. Leading property company RWinvest, have an extensive guide on UK property investment should you be looking to invest there. Compare the information you find against other local knowledge to confirm the facts and make the right choice.
Know Your Budget
When it comes to working out your budget, you need to be realistic. Those that over-stretch themselves in the beginning can run into problems later on. Have your finances in order before you invest, and this can save a lot of unnecessary stress. You want your property investment to be an asset, not a liability. When calculating costs and familiarising yourself with figures, you’ll need to take into account added expenses as well as any legal fees. It’s also good practice to have some money to fall back on in case of an emergency, as having a property may tie up all your capital. Unexpected maintenance costs for the property might occur, or if you’re renting it out, you could experience some void periods where your rental payments will stop. It’s best to cover yourself from all angles, so you’re prepared if any problems arise.
Choosing The Right Property
Perhaps you want to buy a modern apartment in the city to rent to young professionals? Or maybe you have your hopes set on a bigger project and want to invest in commercial property? Either way, it requires some thought and depending on which property type you choose will determine costs and how you manage your investment going forward.
If you want a more hands-off approach, then you will need to hire a property management company to take care of business for you. Ultimately you decide how involved you want to be in the upkeep and running of your property. Employing someone to carry out maintenance and complete tenancy paperwork is the preferred choice for many people. Thay way, their investment rarely interferes with their day to day lives, allowing them to continue working their 9 to 5, or simply, to sit back and enjoy the returns on their investment.
Renovate And Flip, Or Keep?
If you decide to purchase a property to then do it up and sell it for a higher price than you paid, then you will definitely need to watch the housing market closely, especially in the area you’re looking to invest in. Before taking on the project of renovating a property, you’ll want to assess how skilled you are at DIY or if you’re going to pay someone to complete the work for you. Completing all or at least some of the renovations can reduce your costs significantly, and you may even pick up a skill or two along the way. Alternatively, you could look for properties that only require a lick of paint and small maintenance repairs to freshen up the interior.
After finishing the work, you may decide not to flip the property and keep it as a rental. That way, you can benefit from monthly rental payments and still make a healthy profit in a few years time when you eventually come to sell. Of course, this will only happen if you’ve selected the right location and the market is performing well at that time, with the property increasing in value. Be mindful that this is a long term investment compared to flipping a property which is more of a short term project.
Good luck investing with success on your real estate properties!
