It’s important to try to maximise your money when you make any investment. Ideally you are searching for something that will help your money to grow in value and something that you can confidently understand. For many people, both of those factors point towards investing in property.
Rental income and rising prices mean that, even accounting for Stamp Duty rises, the amount you can earn with bricks and mortar makes it a more attractive proposition than simply squirreling it away in a savings account.
But, if you’ve reached that stage and don’t know where to go next, here are some beginner’s tips to help you out:
Don’t even start looking for a property before you’ve planned everything out. You need to know precisely how much you can afford to invest. Preferably you should arrive at that figure after a full audit of your accounts and outgoings. Don’t leave yourself stretched by tying too much cash up in an investment.
Rent or sell?
Investing in property can come in different forms. You could, for example, buy up an old or dated property, spend money on renovating it and then look to sell it on for a profit. Alternatively, you might be looking for a long-term income from rent. Think carefully about both options. The first path is ideal if you have a flair for the work involved yourself or know of a trusted trader who could carry out the work. The second ensures you have an investment that delivers a steady income every year, as well as when you decide you want to sell the property.
Pick the right area
Remember that buying a property involves investing in a location, as well as in the property itself. This is important for the would-be investor as the conditions in your location can help to drive growth. University towns and cities with a relatively low housing stock can provide a strong rental yield, for example. Be specific too. Individual streets in and around top performing state schools are likely to command a strong price. Use the tools available to you online to understand a true picture of the property market in your target area.
Yield shows your return
If you’re looking to rent your property out, then the ‘yield’ is the most important thing to focus on. This shows where you are getting the best relative return for your investment. Some places will provide a high yield on a relatively low price, for example. Totally Money puts Leeds at the top of the pile when it comes to providing the highest yield in the UK, at about seven per cent. The yield is the annual income you receive, based as a percentage of the purchase price.
Shop around for buy-to-let mortgage deals
As This Is Money shows, there are good deals to be had on finance for buy to let mortgages. It reports that the average two-year fixed rate deal is below 3.5 per cent, while some providers are offering sub-two per cent deals.
While yield is a useful comparative measure, don’t discount the power of quality. As discussed already, the ‘quality’ of an area will impact upon a property’s price but so too will the quality of the home itself. Large and high class homes in the luxury market have an enduring appeal – and only need a small digit growth to accrue wealth as an investment. Just look through the pages of Financial Times Property Listings and you’ll see a selection of dream homes in dream locations. Buy the best home in the best location you can find to get the best return on your investment.
Don’t discount overseas markets either. Property investments abroad can be lucrative if you’re smart about where you choose to purchase. City AM recently reported that the EU’s highest rental yield is to be found in the Netherlands, where investors can earn 6.57 per cent. With the right professional support, and translation services, this can reap good rewards and is worth researching.