How Property Investment can work for you

Gaining financial security is the main reason why most people turn to property, which is no surprise because property has been and continues to be one of the most solid investments around.

Investing in property represents the best reward vs. risk investment you can make for you and your family. It’s commonly known that pensions are giving poor returns, so whilst other investments are failing to deliver, property investment in the UK and overseas continues to grow.

Property in the UK has doubled in value on average every 8.2 years since 1946 (when the average house price was under £1500!) and some overseas property hot spots have seen an average 15% annual growth in recent years. Deciding whether you want off plan, key in hand, renovation or auction property are all important decisions to make when it comes to building an investment property portfolio.

For most of us it’s the only investment we have ever made any significant money from; and we all have friends, family or neighbours that have or wish they had done the same. We’ve seen our own property and the properties around us go up in value and continue to do so and comments like I wish I had bought five years ago are commonplace.
It’s all about finding the right property for the right price at the right time.

Here’s the main reasons why people invest;
• Legacy – to leave something tangible for your loved ones
• A comfortable early retirement
• To increase current wealth status
• To supplement or replace a pension for later life
Understanding your property investment needs
The simple fact that you’re even reading this feature shows that you’ve realised that you have to do something to secure your future. You’ve also hopefully identified that property is your solution so you need to start asking yourself some questions; who do you turn to? who do you trust? if you don’t have the expertise yourself, how do you find out how to do it? and who has the time with full time jobs and busy lifestyles?

Its time for you to take a closer look at your circumstances to figure out your needs. After all there’s no point buying a buy to let or a renovation project if you simply don’t have the time to dedicate to finding tenants, doing DIY jobs or project managing.

Apart from deciding how much time you can spare, looking at your finances is another fundamental need. Whether you’ve got savings, plan to use equity from your current property or get a loan, your ability to raise funds will determine your overall strategy.
All developments have an entry price. This price obviously varies but for off plan it’s usually a percentage of the overall purchase price until the property is complete. For key in hand properties an administration fee secures your reservation then the remaining funds will have to be sourced pretty much straight away.
Devising your entry strategy
• Financial situation – where can you source funds from, how quickly and how much.
• Time – Assessing other work/life commitments will help you figure out this part of your strategy.
• Timeline – are you starting or building an investment property portfolio? How long do you want to keep it?
• What’s most important, regular income or longer term capital growth?
• Type of property – off plan (not built yet), key in hand (ready to move in to), renovation (DIY projects)
• Usage of property – holiday lettings, residential lettings, personal etc.
• Size required – Who’s your target market? i.e. If your planning to rent your property out to families on holiday don’t buy a one bedroom apartment!
Devising a strategy is essential and a reputable company should provide you with the help and support you need if required.

Once you’ve established your requirements, it’s time to move on to finding the best investment deal – always remember though property investment is a head decision not heart, so finding the most financially savvy deal is the key.

How to put your investment strategy into action

With your finances and strategy in place, it’s time to take the next step – choosing a reputable company to match your requirements with the best investment opportunities available.

There are many companies in the property investment industry so you have to be careful about whom you choose to trust. Many advertised investment properties simply don’t make sense because the figures don’t stack up – you just need to know what questions to ask. Research is the key, do you really want to pay for expensive seminars when you can get the same advice for free from experienced property consultants? Equally beware of companies that offer cheap inspection trips, they often use hard sell tactics in the hope that you’ll sign on the dotted line without carrying out your own due diligence checks.

Another point worth mentioning is that there’s no governing body managing the investment property industry. So perhaps look for a company who uses FSA regulated finance partners, this way you’ll have the peace of mind knowing that a trusted relationship is in place between the partner and property company.

Once you’ve decided who to approach, a reputable company will talk you through your requirements then discuss what options you have – if they go in for the hard sell straight away steer clear – they’re not interested in getting you the best deal, just closing the deal and getting their commission.

Good property consultants will want to understand your circumstances and will help you ‘firm up’ your strategy and put it into action. They will advise you on the best opportunities including the different finance stages, supply you with all the relevant investor data then it’s down to you to make the next decision.

Securing your first, second maybe even third property!

Once the figures stack up, you’ve had all your questions answered and are happy to proceed, you need to take your commitment further. Generally this process follows a certain pattern:

•    You confirm you’re happy to proceed
•    You sign the relevant documents and pay a fee to secure/reserve a property
•    You visit the development/property
•    Again you confirm you’re happy
•    Legal documents and contracts are signed
•    You pay for your property – if you’re buying off plan you’ll only need to pay a percentage of the agreed cost until it’s built.
•    Then finally you can use your property to reap the rewards!

All forms of property investment should be viewed as a medium to long term commitment which means a minimum of five years. ‘Flipping’ is a term used to describe selling your off plan property before completion, this was popular several years ago for making a quick profit, but it’s very risky. Buying off plan gives you a great discount to begin with then you’ve got to wait until it’s built before you can obviously rent it. Buying key in hand property means you can benefit from a rental income straight away. Either way, the longer you keep hold of your property the more capital growth you’ll achieve.

Your commitment and dedication can be as much as you want, obviously during the first few weeks of committing to a deal you’ll need to spend a fair amount of time signing and sealing the proposition. Property investment is flexible to a certain extent, if you’ve got little time to spare but you want to rent out your property you can get managing and letting agents on board to sort it for you. Involving a third party obviously means they’ll want a cut of your profits so dealing with this yourself will be more cost effective but time consuming.

Investing as a full time occupation

In general people view investing in property as a way to gaining financial security for their future. For many investors they manage their investment properties alongside their regular full time job, providing an extra source of income.

However full time property investment is big business. Experienced investors know the pitfalls of doing it full time and can manage it well, but for novice investors this could be a massive gamble.

Giving up work to become a full time property investor is a big commitment. Whilst it may free up your time to concentrate on your property investments, you’ll need a regular cash flow to support you.

There are two main ways to running your investments as a business; by becoming a professional residential landlord or becoming a property developer.

Becoming a landlord

Serious investors with multiple properties often become professional landlords. This in itself is a challenge but it has the potential to be very profitable.

The main benefit is you can achieve good rental rates because the cost of renting a property is now higher than ever before. The Association of Residential Letting Agents has recently reported that rent levels have increased in all UK areas so far in 2007.

However being a landlord of residential property means you have certain responsibilities to undertake to ensure the investment property is up to rentable standard. This includes maintenance, so if you’re not a handy DIY-er you’ll need to factor in the costs of tradesman.

Becoming a property developer

Buying property to ‘do up’ has proved very popular over the last decade or so. This boom is mainly due to media coverage, the number of TV programmes highlighting the potential profits to be made in property is astonishing.

Fuelled by the inspiration of other success stories the market has been flooded with wannabe developers, which has and continues to have a knock on affect on the housing market. High demand for previously undesirable properties naturally increases prices so there’s actually less of a bargain to be had than pre boom times.

Buying property to develop and sell on for profit is a very ‘hands on approach’. A constant cash flow to pay for materials and labour is essential, not to mention the need for good project and time management skills.

To recap…

Over the past three weeks we’ve covered everything there is to know about how property investment can work for you. We’ve talked you through the reasons why people choose property, the process of starting your portfolio and the options of how to do it full time.  The main thing to remember is property investment is not a get rich quick scheme and there are no guarantees, but the historical evidence proves property is one of the best investments you can ever make.

© Equity Property Portfolios ltd 2007, UK and Overseas Investment Property Specialists.
Article provided by http://www.equitypropertyportfolios.co.uk

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