Research shows that over two million people in the UK have now made investments in residential property. What makes it attractive is the ongoing and regular income rentals property investment can provide, along with the prospect of being able to sell for a lump sum at some stage in the future. This is especially true at the moment, at a time when interest rates for cash savings are so low. As people’’ life expectancies increase and the average age of retirement goes up with it, you may have dreams of bucking the trend and being able to retire early by building a portfolio of property.
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We recently shed light on how much being a landlord in the UK costs. If you’ve considered your budget and think that you can now afford to take on that role, we look at things to consider before you get started in this article.
Research. then research some more
There can be no substitute for immersing yourself as fully as possible in the subject and learning as much as you need to know to make informed decisions. You’ll almost inevitable seek out professional advice from a lawyer or experienced property investment broker, but ultimately it is your decision and don’t forget, this is your long term future we’re talking about. Put time and effort into research to make sure you invest your money wisely. Read widely, both fact and others’ opinions, but don’t let the apparent complexities put you off. There are plenty of specialists able to help with those issues.
Have a realistic budget
It’s easy to get carried away with thoughts of free money coming in every month ñ and by ëfree’ we mean money you haven’t had to put the hours in to earn. Realistically, though, most people will invest through a buy-to-let mortgage. So factor in your repayments. You may be able to offset some of these through your tax bill, but you should be considering not only the cost at current interest rates, but how much you will have to pay if those rates rise. Also consider what else will have to come out of your monthly ëdividend’. You will need to pay property maintenance costs, insurances and the like too. Use this to start deciding what can you afford and where.
What to buy?
There are still some good deals to be had in terms of run-down properties in up-and-coming areas that you can then renovate and let out, although perhaps not as many as there once were. Be aware if you take this route, though, that you are making a big commitment not only in terms of money, but also time, which can be tight if you’re working your way up the property ladder or have a young family. There will be ongoing maintenance once the property is let out too. New-builds are great for first-time investors: they are typically low maintenance and appeal to a wide range of renters, reducing the potential for void periods which will eat into your profits.
Where to buy?
You want to maximise your ability to rent your property out as much of the time as possible. If you plan to be a hands-on landlord, it makes sense to buy somewhere close to you. But if you’re going to use a letting agent to manage the process for you, you can afford to look for somewhere further afield. Read up on trends that may help guide you: student accommodation is in high demand at the moment, for example, so perhaps you could buy close to a popular university? Maximise your chances of reducing costly void periods as far as possible.
This, of course, is just an overview. It will take a lot of time and effort to climb the first rung on the ladder of property investment. But with determination and forward planning, you just might be able to the life of your dreams sooner.