So, you’ve taken a look at that property ladder, propped up against a crumbling wall, and decided you want to get your decks on the first rung? Well, good luck to you. It’s a murky, shape shifting world out there where nothing is as it seems and all that’s assured is unpredictability. Factor the country’s current political instability into things and you’re going to need some serious guidance (and a crystal ball) to get you through those first steps. After that, rest assured, there’s money to be made. Well, we’re here to offer a little guidance, with these; our 4 IDEAL tips for first time property investors.
LOCATION, LOCATION, LOCATION
How many more times do we need to repeat the L word until you sit up and listen? But choosing where to buy your first place (not just the city, but the town, even the street) is the crucial consideration in the pre-emptive stage of your property search. Everything hinges on you getting this decision right. And, when it comes to property investment, an increasing number of people are turning their backs on London and the previously desirable, affluent South. Instead, people are casting their gazes Northwards.
House prices are notoriously high in the South compared to up North. The average house price in London comes to around £483,400, whereas in Liverpool the average price stands at £121,00 and £167,700 in Manchester. To put the affordability of northern property into perspective, it’s worth comparing what you could buy for the same price in the North compared to in London. In London, for instance, you could buy a two-bedroom apartment for £500,000, whilst in Liverpool, you could purchase a spacious six bedroom house with a garden for the same price. That said, according to UK property experts FJP Investment places in the south like Colchester and Leytonstone are attractive places to invest in as they are forecasted to see high capital growth in the near future.
UNDERSTANDING CAPITAL GROWTH & RENTAL YIELDS
Speaking of capital growth (sometimes termed capital appreciation)… this and the different types of rental yields is something that all wannabe property investors should get their head around early on. So let’s get to it; capital growth is the value by which the property goes up over time whereas rental yield is the return on a property from a rental perspective.
Most property investors have long term ‘buy and hold’ strategies in mind, and for many, there are really only two property investment strategies – to buy a property and sell it on for profit, or buy a property and rent it out. While the first one is pretty self-explanatory, the second is a little more complexed. By buying a property to rent out, you’ll make money in two ways; the monthly rental income and the growth in the capital value of the property over time.
Before you decide to invest, you should determine how much you need to yield or make from your investment to make it profitable. There’s more to purchasing an investment property than the initial cost and potential rental payments. You need to factor in maintenance and what will happen if you enter a void period. To calculate the rental yield, take the yearly rental income and divide that by the purchase price plus costs. Then you take that figure and multiply it by 100 to get a percentage.
THINK ABOUT THE VALUE YOU COULD ADD
‘Hey, we haven’t even bought the property yet and you want us to think about selling it?’. Well yes actually. Because if you don’t want that tentatively placed foot to slip off the property ladder, then you need to view every place you look at as an investment. So, before making that purchase, consider what value you could add to the place, and how easily. If you can envisage adding easy value then you may just earn some money on it later down the line. We’ve got a whole load of tips on increasing your property’s value here; check them out and bear it all in mind when eyeing up those potential places.
DON’T BUY SOMEWHERE FOR THE SAKE OF IT
A word of warning; don’t just buy somewhere because it’s cheap and rush the process purely because you want to get on the property ladder. It goes without saying that good transport links, amenities nearby and low level crime rates are crucial considerations outside of the four walls of a place. Moreover, personal considerations should guide your choice of where you want to buy a house. Ask yourself how much money you want to make and how much time you want to put in. Is it a second home for weekends away and perhaps a little extra income via Airbnb? Will you do it up and sell it on? Or do you plan to rent it out on a more fixed basis? This should guide your priorities.