Buy-to-let landlords may not be particularly happy with the government right now, but it’s way too early to start predicting the death of this market sector. All markets are ultimately governed by the laws of supply and demand and in the UK the simple reality is that the supply of housing is much lower than the level of demand.
This means that there are most certainly still opportunities to make money out of property – provided that you take the right approach. Decide how much money you can afford to invest, how long you are prepared to commit to an investment and what level of risk you can tolerate.
These three questions will determine what form(s) of property investment could be suitable for you. For example, if you can afford a substantial up-front investment, are comfortable with risk and want quick results, then you may enjoy becoming a property developer.
On the other hand, if you would prefer a lower level of risk and are happy to take your returns in the form of long-term income, then becoming a buy-to-let landlord may be a more appropriate choice. If, by contrast, you’d like to make your entry into property investment one small step at a time, then it might be best for you to start with property-related shares, funds or peer-to-peer lenders. The team at Property Cash Buyers share some tips on getting the most value out of buying and selling properties for profit.
Do your research
This holds true of any form of investment and is absolutely critical to making a success of property investment.
Choose the right area
First of all, you will need to choose a geographical location for your property search. As a rule of thumb, if an area has obvious appeal (e.g. university towns) then it may make for a safe investment, but it is also likely to attract attention from other investors, pushing up prices. Investing in up-and-coming areas may carry more risk and/or require a longer time scale to see full returns, but could offer much better value over the long term. When considering where to invest, remember that the further away your investment property is from your home, the more you will have to rely on other people to manage it for you.
Choose the right target market
To a certain extent, your target market will be dictated by your chosen geographical area and in a handful of locations (typically university towns) there may only be one significant market segment. In many areas, however, you will have a choice of tenant groups and will need to make a decision regarding which one to target. For example, the central areas of major cities tend to be attractive to young adults, who may be students or young professionals. For students, affordability is likely to be higher consideration than extensive amenities, whereas young professionals may be willing to spend a bit more to get a place they can really enjoy calling home. Both markets can be profitable, but they benefit from different approaches.
Choose the right sort of property
The right investment property is one which will appeal to your target market, which means you need to think about what features they will see as benefits and what features they will ignore or even see as drawbacks. For example, to young adults a garden may be just a nuisance, but to a family with children, it can be a huge selling point.