You’ve seen the returns that are available with smart property investment, you’ve watched others profit from afar, and you’re keen to now take those first steps that will finally get you on the property ladder.
Whilst we don’t want to temper the enthusiasm of anyone who’s looking to make that first investment it’s important to be aware of some of the mistakes that first time investors can be drawn towards and how best to avoid these.
Making the Wrong Investment
This may sound like the most obvious area to start with but you’d be amazed at the many investors who have approached us for our advice after making a property purchase.
Often they’ve bought in the wrong area (leading to challenges in finding suitable tenants), at the wrong price (diminishing their returns) or within a building/development which has long-standing structural issues (leading to costly repairs).
These are all items we can help investors avoid, however it’s very hard to resolve key issues such as this once a purchase has been made.
💡 Intimate local knowledge is crucial when investing in property. Often the difference between a good and bad investment in any major city can be just a few hundred yards.
There can be a number of reasons for investors making poor investment choices. Having an affinity with a certain area for nostalgic reasons is not a good strategy when searching for an investment property (nostalgia’s not what it used to be!). Nor is buying in a location purely because it’s conveniently close to your own home.
💡 We often see investors let their hearts rule their head in such cases and it’s important to adopt a more clinical investors mindset with such decisions, rather than an emotional mindset which can lead to mistakes.
💡 Know your numbers, have a clear idea of what you’re looking to achieve, and make your decisions on that basis alone.
Underestimating the Cash Flow Required
Securing the right property at the right price is of course vital, but it’s equally important to be aware of the other costs involved when investing in property and to ensure you budget accordingly.
In addition to the purchase price itself there are other fees associated with your purchase such as conveyancing fees, additional dwelling supplement, and possibly mortgage and sourcing fees.
Depending on the condition of your new property you may have also have to set aside budget for refurbishment. This may be for relatively low-cost items such as new carpets and décor, or potentially more substantial costs for larger jobs such as a new bathroom or kitchen.
Think too whether you want to furnish your property ahead of putting it on the market. We’d generally recommend doing so if you’re investing in property in faced paced, city centre type areas, which will be appealing to the professional market.
Finally there are standard pre-let safety requirements that should be attended to before your first tenancy begins. This includes gas and electrical safety checks, the installation of suitable smoke & heat alarms, and an up to date energy performance certificate (EPC).
If you’re in any doubt as to what’s legally required before letting out your property or of any of the costs involved we’ll be happy to cover this with you in more detail.
Self-Management v Professional Management
When it comes to the ongoing management of your rental property you have the choice of providing this service to your tenants personally or employing a local letting agency to do so on your behalf.
At first glance it may seem a reasonable option to do this yourself, however many investors underestimate the many tasks required when providing effective property management.
Property management – when done correctly – can be a very hands on and intensive process.
Marketing your property, finding suitable tenants, conducting a formal check-in/check-out process, addressing maintenance issues, collecting monthly rent, registering your tenants deposit, and staying on top of current legislation are just some of the items on a fairly exhaustive list.
I think you can see where we’re going with this but our advice to serious investors would be to always employ the services of a trusted local letting agent. At a relatively low cost of around 10% of the monthly rent this is potentially one of the easiest decisions you should ever make when it comes to property investment.
When selecting a suitable agent be sure to take the time to assess online reviews, take recommendations and assess service levels before choosing the agent that best fits you and your needs.
💡 Appointing the correct letting agent will allow you to then enjoy the passive income that property investment offers in a hands-off, hassle free way.
The examples highlighted here are just some of the crucial decisions that first-time investors face when navigating their way through the property investment landscape.
We understand the challenges they face.
We’ve been over the course many times before, both personally and professionally, which enables us to ensure our clients are making the right decisions on every step of their journey.
This is why many of our clients make the choice to benefit from our lengthy industry experience and intimate local knowledge when making their early ventures into the property market.
Even the most experienced and successful property investors out there had to begin somewhere. Take your first steps towards effective property investment with our FREE Property Investment Consultation by clicking the link below.