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Investing in the property market has long been considered a smart move, and as the demand for rental properties grows, it is not difficult to understand why people are attracted to this field. Like all investments, however, there are things that you need to think about before you put your money into it and this is what we are going to explore in this post.
What kind of property investment will you go into?
There are various ways to invest in property. You can buy to let out to long-term tenants or as holiday or short-term lets. You could also consider commercial properties. It all depends on what you want to get out of the investment and how involved you want to be.
How much can you put into the investment?
There is no point in banking everything on buying a massive property in a fashionable part of the town if your budget can only extend to a modest apartment in an up-and-coming neighbourhood. Whatever your budget, there are investment possibilities, but you need to be sure you have enough resources in place before considering a purchase.
You also need to take into account other fees and expenses related to the purchase of a property. The price ticket of a home is not going to be the full amount that you will need, so make sure that you look at the bigger picture.
Could you even think about partnering with someone else and pooling your resources to make a bigger and better investment? This Connected Investors review can give you more information and whether it is worth making contact with fellow potential investors.
What sort of income do you want to make?
Once you are aware of how much money you can justify spending on the purchase of a property, you can think about the income that you hope to generate from your investment. The higher the return, the more appealing your investment is likely to be, so the lowest and highest potential returns that you could expect need to be calculated.
Three important things to bear in mind are:
- the initial cost and associated fees of the property you are renting out
- how much it will cost you to manage and maintain every year (don’t forget letting agent and cleaners fees!)
- the income you will get from renting it out
Have you thought about your legal obligations?
When you are looking to become a landlord to gain an additional income, you may not be fully aware of the responsibilities associated with renting out a property. It needs a solid business strategy, which means you need to focus on things such as the tax implications of buying and renting a property. Depending on where you live and where the property is, you may have other obligations and responsibilities to ensure that you meet the legal requirements.
What sort of landlord do you intend to be?
This is a question that all potential landlords need to ask themselves well before they take the leap into this lucrative form of investment. Do you want to be a hands-on landlord, involved in the day to day management and maintenance of the property or do you hope to have as little involvement as possible, and just wait for the passive income to roll in? Both options have their pros and cons, but it is important to have an idea of what you want to do before you jump in with both feet.
Property investment is showing no signs of slowing down, so it is a tangible asset worth looking into. However, it is important to take your time to think about the sort of landlord you want to be, how much risk you can take and what you are legally obliged to do before making a purchase.