How To Get Into Property Investment: Beginner’s Guide
Property development can be an extremely rewarding venture and offers the scope for both wealth generation and rental income. To get it right, you need to approach it with a good understanding and strong strategy.
To make it easy, here’s a step-by-step guide on how to get into property investment.
Do your market research
The first step in working out how to start property investment is doing solid market research. Look at the different kinds of properties available. These generally fall into residential, commercial, and multi-use. Consider current market trends and the associated prices, rental yields and factors that affect property value, like interest rates and inflation.
Set clear goals
Decide exactly what you’re trying to achieve with your investments. Is it long-term capital growth or a steady stream of income from rent? Maybe it’s a mix of both. Your goals will heavily influence your overall strategy and the kind of properties you invest in.
Pick the right location
Where you buy property is a huge factor in property investment. Seek out areas with a high demand for property, along with strong transport links and highly rated key services like schools.
Hubs like Manchester and London have super robust property markets, but there are also amazing opportunities in surrounding cities like Stockport and smaller countryside towns.
When working out how to get into property development you should also research the future development plans and local economy of your chosen area. This will offer a glimpse into how demand and rent prices might change.
Study the costs involved
There are plenty of costs involved outside of your initial purchase price. These include:
- Stamp Duty Land Tax (SDLT): Paid on property buys over a certain threshold.
- Legal Fees: Legal services and conveyancing comes with costs
- Survey Costs: You’ll need an expert to evaluate the property’s condition
- Mortgage Costs: These can include interest and arrangement fees
- Upkeep: Plan for any required maintenance and important renovations
Having a clear understanding of these costs will help you to forecast accordingly and avoid any nasty surprises down the line!
Finance your investment
Most people tend to use a mix of both mortgage financing and personal money to buy property. There are a few different kinds of mortgages available, including buy-to-let which is specific to rental property. These need a larger deposit than a regular home (normally about 25%) and can have higher interest rates as well. After thoroughly researching how to start property investment, get in touch with a broker to find the best option for your unique circumstances.
Legal implications
Make sure you’re airtight with any legal requirements involved. These can include getting the appropriate licenses if you’re planning to rent the property out.
You’ll also need to stick to any safety regulations for things like gas and electricity and understand the rights of your tenants under the Landlord & Tenant Act. It’s normally best to consult somebody who specialises in property law to understand the complexities involved.
Manage the property
One of the big decisions when looking at how to start property investment is deciding whether you’re going to manage the property yourself or let a letting agency do the work for you. Doing it yourself can seem like an attractive option but don’t underestimate the time and energy involved. Letting agents usually charge about 10-15% of the monthly rent but will take care of the screening, rent collection and maintenance.
Consider the tax
The income you make on rent will be subject to income tax just like any job. You might also need to pay capital gains tax when you sell the property in the future. Keep tidy records of any income and expenses related to your investments and consult a tax advisor to make sure you’re in line with any HMRC regulations. They’ll also be able to advise you on any tax reliefs you might be eligible for.
Plan for the future
Even if you’re only just looking into how to get into property investment, it’s always good to plan for the future. Investing in property is usually a long-term endeavour and property values can fluctuate significantly over time. Be patient to ensure you get the high returns you’re looking for and have a clear exit strategy if things don’t go to plan.
Property investment can be a massively fulfilling venture and very lucrative if you choose your investments carefully. That said, there’s a lot to get your head around and plenty of pitfalls to avoid.
Experts in property development, Daniel James is well-versed in selecting the best opportunities. Get in touch with us today if you’re looking at how to get into property investment and need a head start!
