If you’re looking for a profitable but passive income stream then you should be considering property investment. However it's vital to be aware of all elements of property investing before proceeding.
We take a look at 4 of the most important items here and provide our recommendations for navigating these key areas.
What Area To Invest In
You need to think very carefully about where you’re going to buy.
There are a variety of high-performing areas throughout the UK and its important to clarify which location will allow you to achieve your objectives most effectively.
Take the time to study the property market in that particular area and focus on where you can find value.
💡 Remember, each location can have its own unique quirks and can be affected by many different factors so it’s important to seek out intimate local knowledge when carrying out your research.
In Scotland, an example of this may be the low performing Aberdeen market at present. Aberdeen as a city has traditionally relied heavily on the oil and gas industry and following the oil price crash of 2014/15 average house prices in the area have also dropped fairly dramatically. There are slow and sure signs of recovery there, however at present the booming Glasgow and Edinburgh markets may be more appealing to investors.
In any major city it can also be very easy to invest in the wrong specific locations - even by just a few hundred yards - and it's crucial to acquire the local knowledge and experience which will help you to avoid the bad investments which can be easy to stumble into.
What Type of Tenants are you Looking to Attract?
A further key consideration is whether you’ll invest in a fast-paced city centre location, or if investing on the outskirts or the suburbs are more appealing to you.
Each attracts very different tenant types so it’s important to be clear on the tenant type you want to target.
💡 There are a variety of tenant types on the market such as students, families and working professionals to name but a few. The type of tenant you seek will be determined by the type of property you choose to invest in.
Renting to students for example means you need to purchase accommodation close to universities and city centres which provide security and modern living.
Families may be looking for a home which is more spacious and perhaps further away from the bustling city centre, whereas professionals may be contrast be more drawn to city living.
Your Legal Obligations as a Landlord
You have clearly defined legal obligations as a landlord.
It’s your responsibility to provide a safe property which meets all relevant legislation. This includes items such as gas and electrical safety checks, smoke and heat detectors, an up to date energy performance certificate and several other items.
You’re also required to register as a landlord with the relevant local authority, with failure to do so incurring serious penalties. You also have an obligation to maintain your rental property to a certain standard throughout your tenancies.
💡 The legislation within the Private Rented Sector (PRS) is subject to frequent changes and it’s important to stay on top of this, either on your own or with the assistance of a letting agent.
Managing Privately or via a Letting Agent
Finally you need to consider whether you’ll manage the property privately or whether you’ll employ the services of a local letting agent.
Managing the property privately may save you some money in the short term but you need to ensure you have the time and systems available to provide effective management and maintenance of your property.
💡 Property management, when done correctly, can be a fairly time-consuming process. There are many tasks to be carried out when managing a rental property such as advertising the property, finding the right tenants, arranging check-ins/check-outs, arranging maintenance issues, collecting monthly rent, and of course ensuring the property is safe and legal at all times.
A good letting agent will manage all of these tasks for you and will maximise exposure of your property by promoting it to a wider marketplace anytime you have to find new tenants.
Property investment is a detailed and at times complex area and it’s important to be aware of all the facts before deciding how best to proceed with your investment purchase.
The items described here form a small snapshot of the bigger picture and it’s vital that you have the necessary information on all aspects before taking your investment forward.