10 Rules You Need To Follow For A Profitable Investment In Property

Buying property is one of the safest ways to invest in the UK. We’d all like to believe an investment property is a simple and easy process, and in some cases, it is!

However, there are some crucial pitfalls that you’ll want to avoid when investing, so below we’ve listed out the 10 tips to survive property investment in 2018.

But first, let us define what property investment is to be clear on our objectives –

It is the practice of using your money to purchase property to rent for consistent income and/or sell at the right time for a profit.

• Buying at the right time

You obviously want your investment to increase in value and so buying at the right time is absolutely crucial.

Real estate can often be difficult to value, with many properties being overvalued at the expense of the buyer. But, on the flip side, this also gives you the opportunity to acquire a property that is undervalued.

Focus on areas you know well and know the value of. If you know the area well you are more likely to understand the demographic it attracts and the type of property people are looking for.

• Managing your cash flow

Poor or lack of cash flow is one of the primary reasons why investors are forced to sell their property sooner then they’d like.

You don’t want to sell your property until you’re good and ready and if you were to encounter some financial stress you might be forced to do just that.

Once you own a property and rent it, it can be relatively inexpensive to keep it. However, changes to the taxation of buy-to-let investments mean you need to make sure you keep on top of what taxes you owe and what you can offset against your profits.

• Be clear on your property objectives and strategy

Most investors’ goals are to build a portfolio that will one day give them financial freedom.

But to achieve this, you must have a clear strategy with targeted objectives in mind. Don’t throw yourself into any property without fully understanding what you want.

Work out exactly what you want to achieve from your property investment and pick your properties based on this.

With a properly thought out plan, you are far more likely to achieve success and financial freedom.

• What kind of loan is best for you?

There are so many different loans (mortgages) to choose from out there, it’s not only difficult to choose one, but to know which one is right for you.

It’s important to get impartial advice from a financial adviser who can also help you structure your loan repayments to suit your needs. You don’t want to get in over your head when it comes to repaying.

The key choice is between a repayment mortgage or an interest only mortgage. A repayment mortgage will cost you more, leading to lower cashflow, but will mean you own the property at the end of the mortgage. Interest only mortgages are far better for cashflow, but leave you still owing the debt.

• Don’t be distracted by what other are doing!

There are lots of different property strategies around, and all of them are successful in the right circumstances. Once you have researched and selected your property strategy, stick with it.

It is easy to be distracted by what others are doing and their apparent successes. You might think that as well as doing what you are doing, you should try a bit of what they are doing too.

But this is a recipe for frustration and failure. Dabblers do not succeed. You need to stick with your proven strategy and not divide your attention across several strategies.

• Do your due diligence before deciding to offer on a property

So many people invest in property before doing any research or homework. Understanding property markets takes time and it’s important to understand the property fluctuations in the market.

Take the time and do every bit of research you can on the property.

Check the property at least 2 or 3 times at different times of days. Is the neighbourhood noisy? Did you miss something last time?

Check why the vendor is selling. This can make a big difference in your negotiation strategy.

Being thorough can be the difference in a sound investment and a poor one.

• Property investing is all about the numbers, let them dictate what you do.

Property investing is all about the numbers.

You make money on property when you buy, so you need to buy at the right price i.e. a low price.

This means most of your offers will be rejected initially, so you cannot put all of your eggs in one basket and just offer on one or two properties. You need to have lots of offers out at the same time – we used to aim for 40 live offers at any time.

You also need to know your numbers on each property. What price works for you, what profit/cashflow will it give at different purchase prices.

There should be a target, a minimum level of profit/cashflow, and if the property does not meet this target then you don’t offer on it.

• Deal with integrity, property is a people business and integrity will get you deals

While properties are commodities, made of bricks and mortar, they are bought and sold by people.

For most people price is important, but just as important is whether they can trust you. Do not promise something you cannot deliver.

Be honest and tell them what you can do, and if necessary why you cannot do what they want.

Do this even if this loses you an opportunity. Property can be a long-term business in many ways and if you deal honestly, ‘lost’ deals can come back to you later.

• Managing risk with a long-term strategy

Remember property investment should be a long-term strategy. You decrease the risk of losing money the longer you plan to commit to a property. Your equity will increase over time and you can start to look at investing in other property.

Make sure you have a long-term game plan. Slowly build up your property portfolio, manage your risks and don’t get too greedy.