‘Look Before You Leap’ When Investing in Real Estate
Don't Forget to Budget for Materials!
Be a Canny Investor
Property investment is never to be taken lightly and requires a huge amount of planning beforehand but if you are prepared to do your homework first and look before you leap, you will stand the best possible chance of being successful. Any business venture, like a house, needs to be built on firm foundations.
There is a vast amount of information nowadays on T.V networks, in books and the Internet regarding real estate investment. Make use of this wealth of knowledge and it will enable you to make a wise and balanced decision when you come to make your first property purchase. The common sense, uncomplicated strategies are usually the ones that work.
An Older Property May Need a New Floor If the Joists Are Rotten
Location, Location, Location
The most suitable rental properties are located in areas which some would describe as "a bit dodgy" but the optimistic prefer to call them "up and coming." If you buy these houses, friends will likely advise you against your strategies by saying it would be better to buy just one house in a better area but if you repeat this pattern of buying houses at the lower end of the market - the 'bread and butter' properties as they are called - the strategy will work. There is always a call for rental properties of this nature and a cheaper, smaller house can command a proportionately higher level of rent. A two up, two down terrace which is economical to run will be of instant appeal to small families and young couples on a limited income. They will be in council tax band A in the UK and will be the cheapest to heat in winter.
It is advisable that any budding buy-to-let investor not be seduced into buying residential property in more salubrious areas as these will not be the type of houses that will generate positive cash flow. You might get a more affluent tenant but there are no guarantees and remember they can still default on the rent. If your chosen investment property is in the higher price bracket, then the monthly mortgage repayments will be higher too and you could soon find yourself in trouble if your tenant decides not pay. With this in mind, never buy a house just because you like the look of it or if the location is desirable.
A Newly Discovered Fireplace Can be a Great Asset in an Older Property
Time is Money
Time is one of the most important factors concerning property investment. A rental property will rarely transform itself into a gold mine overnight allowing you to "flip" it and turn the bricks back into cash. Be prepared to tie your money up for years so don't over commit yourself and have nothing left to live on in the short-term.
The figures always have to stack up when letting property so always work out the estimated income and expenditure in much the same way as you would when checking your own household accounts. As a general rule in the UK, tenants have to pay for the utilities and council tax and contents insurance for their own belongings but you will still need to pay for all repairs and maintenance and buildings insurance and safety checks. Look before you leap with regards to your financial arrangements and you will find that investment in real estate can be both rewarding and lucrative in the long term although you must be prepared to put in a tremendous amount in time, energy and money before you reach that stage.
Forget E=mc 2 ...
the property developer's favourite equation is Time+Bricks=Money!— Stella Kaye
Finding Reliable Workmen Is Half the Battle
'Accidental Landlords' and Legislation
Many home owners, unable to sell their own homes in today's market have had no choice but to let them out instead in order to maintain their mobility in their chosen career. In becoming reluctant landlords they may not be aware of the stringent rules they will be required by law to adhere to. In the UK, all rental properties must have regular checks carried out on the gas and electrical installations in order to protect the health and safety of the tenant. Be wary if you become one of these accidental landlords. The safety rules are not mandatory in your own home whilst you live there but they will apply when you let it to someone else. Basically, this means if your home catches fire and your own family lose their lives as a result, no one will be taken to task over it but if this were to happen to another family who rented your home, there could be a hefty fine or even a prison sentence for non-compliance with the safety standards. Rules aside, safety should always be paramount whenever property is concerned; a damaged house can be restored but lost lives can never be replaced.
Legislation regarding rental property is constantly changing and can be a minefield for novice investors. Whereas landlords of long standing will be used to all the necessary paperwork, as a newcomer you will need to ensure you have all the relevant sources of information to hand before letting your first property. Not only will you need to look before you leap before taking the first steps in real estate investment but you will need to keep a constant check on the ever changing rules and regulations. Any reputable letting agent will have information on all aspects of letting residential property and will help with the obligations you need to meet.
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When letting property, you are required to keep regular accounts of expenditure. Apart from balancing your books for your own records, you will have to keep up to date accounts for tax purposes. Looking before you leap could prevent you from making serious financial blunders. Research what similar properties are renting for and selling for in your chosen area and work out the average rent you could realistically expect to charge. Will there be money left over for repairs and maintenance? Or are you prepared to meet some of these costs out of your own pocket? All this needs to be taken into consideration before any long-term commitments are cut in stone. Looking before you leap is a good rule to adhere to whenever property is concerned. It is always prudent to be wary but don't be so overly cautious that you miss out on a good investment purchase because someone else has beaten you to it.
Now is the Time to Buy!
Now is the time to buy. Mortgage interest has dropped to an all time low and property prices have fallen to a more affordable level. Reasonable finance deals are gradually returning and this looks set to improve the housing market overall. Low-interest rates mean that cash investment is providing hardly any worthwhile return so there has never been a better time to invest in property if you equip yourself with the necessary information and look before you leap.
USA Property Investment Presentation
After reading this article could you see yourself as a property investor?
© 2016 Stella Kaye