Should I invest in property?
Investing in property might take a bit more time and expertise than you initially think. Those that have gone through some form of property investment education can take between 12 – 24 months to complete on their first property, but there’s a quicker and easier way to start whilst learning the ropes.
What is this article about?
This article will give you clear strategies on how to get involved in property investment. When you’re done reading, you’ll have a clear idea of property investment and what your next steps are.
Is this relevant to me? Can I be a property investor?
This is relevant to you if you have a lump sum of cash sitting in a savings account, a pension pot sitting about, or you have friends or family that are looking to improve the interest they’re getting on their savings. It doesn’t need to be hundreds of thousands of pounds to get going, £10k is a great starting place, and if that’s more than you have, there are multiple strategies to get started with less than that.
If you have any money or assets, it’s important that they’re spread over a balanced and diversified portfolio. For example, my investments are spread over :
- Pension (SIPP) that I regularly contribute to (some held in cash, some invested in investment trusts and shares)
- Shareholdings in publicly listed companies – larger investments in well established stable companies and smaller amounts invested speculatively in companies that have high growth potential.
- Property – with a focus on income producing properties (as opposed to investing for capital growth)
Other people also invest in Precious metals, Art, Antiques, Watches, Trainers, Cars, Commodities; essentially anything that can hold a value long term.
All of the above can be split into two categories – income producing or capital appreciation. A great investment is one that can provide you with both.
Together with the rest of the team at Propertunities, I live and breathe property, so naturally my investments are skewed that way – something I am comfortable with because of my level of understanding.
The beauty of property is that in the long term, provided you buy the right deals, it can provide you with both income and capital appreciation.
The downside is for someone who wants to diversify their portfolio to include property, or wants to make their first investment, is that it can take a long time to acquire sufficient knowledge to understand property, build relationships, find property deals, project manage, etc.
Our investors predominantly tend to have either no time, or no inclination to gain a deep understanding of property. They would much rather invest with us and become comfortable in the knowledge that they are “outsourcing” the expertise to us in return for a fixed interest rate.
But why is property such a draw for so many investors?
- Understanding – It’s something in which almost everyone has a basic level of understanding – most people have lived or worked in a property at some point. (Conversely, a huge proportion of the population will never come into contact with shares / investment trusts / commodities).
- Tangible Value – Property has tangible value behind it – the value of the actual bricks and mortar to fall back on, so there will always be value there (whereas stocks and shares you risk losing everything if the company goes bust – with some investments, you can even lose more than you actually put in!)
- Demand – Until the point where we evolve into beings that no longer need our physical bodies, there will ALWAYS be a demand for property. (This is why the food and funeral industries are also good long term investments…)
So how do you invest?
I’ve split it into two sections:
- For those with lots of time
- For those with limited time (Skip Down to Limited Time)
For those with lots of time
- Learn the craft!
- Find your target investment area and investment strategy
- Travel regularly to your chosen area (income up north, capital growth down south)
- Build relationships with estate agents, sourcers, local vendors directly
- Find an opportunity that meets your investment criteria,
- Do the calculations – find comparables, find tenant demand, find cost of refurbishment and all other associated costs
- Make your offers (for beginners it’s often 1 in every 40 offers made that gets accepted)
*takes deep breath*
- Follow up regularly on your offers (even if not immediately accepted)
- Negotiate a price at which your deal stacks
- Set up (and maintain) a limited company and business bank accounts
- Find your reliable team – solicitor, mortgage broker, build team, architect, planning consultant, letting agent, insurance broker (or a combination thereof)
- Provide all the documentation and forms required for a mortgage
- Project manage the conveyancing, the build / refurbishment,
- Deal with set up – utilities, letting agent research, tenant approval, HMO licence sign off / building regs sign off
- Ongoing – renegotiation of energy provider, refinance process, letting agent questions, chasing late payments from letting agents, dealing with accounting and tax
Below is a list of *some* of the people / companies we deal with in getting a deal over the line (we’re always adding to this – let us know in the comments if we’ve missed one!)
2. For those with limited time:
- Find a trusted partner that does all the above
- Do your due diligence on the company and people involved
- Make sure you understand the deals / projects
- Sign one legal document that protects your investment
- Invest in the deal that’s suitable for you.
If you’ve read this far, it’s likely you’re interested to find out more. If you’re interested in finding out more, follow this link and let us know you’d like us to buy you a coffee.
Your Action Plan:
☑ Read this article
□ Establish how much you have to invest
□ Work out how long you’re comfortable to leave the money invested
□ Make sure you keep a portion for a rainy day.
□ Work out what interest rate you want / need to make it worthwhile (clue: most banks are offering less than 1% at the time of writing)
□ DO YOUR DUE DILIGENCE! On any property company and the project
□ Make sure, in your mind, that if an opportunity comes up, that you’d be happy to invest and that there are no other reasons that could stop you investing.
□ Check with your bank in advance the process of transferring the money, and any limits your account may have in place.
Click the button if you have questions or would like to find out more: