Our Advice on New Investors in 2023
We chose to invest and develop properties to make a difference to the property market and the make adifference to the tenants that we house. However property is a powerful asset for us for the following reasons:
a. Property is an understandable & controllable asset. When purchasing a propertyyou are purchasing a physical asset, something you can see and touch rather than something conceptual like shares, futures or bonds. With property you do not require specialistknowledge making the knowledge barrier to entry lower than complex investmentssuch as currency trading or cryptocurrency. Investment properties are more stable thanstocks, funds and cryptocurrency during economic instability. As the population continues to increase, demand for housing will remain ensuring the stability ofhouse prices.
A big advantage is that you have control over your asset, unlike other investments. Property investment has the option to add value to your asset growing the income and value of the property. In addition you control over when and where you buy, sell and if you want to adjust rent as the market changes.
b. Regular Income. With investment property you are able topredict cash flow and have a reliable constant income. Income is more certain because you receive constant rental payment from the tenants. If the rental income is higher than the mortgage repayment of an asset, the loan will slowly pay itself and you may also have surplus funds to cover any property costs incurred. The best way to ensure that your return on investment remains consistent is to minimize thetime between tenants. This minimizes the time when the rental income is less than the repayments on your mortgage.
c. Capital Growth. Property markets in the United Kingdom havehistorically enjoyed stable long-term growth. Should this continue, any property investment should grow in value. Commonly, property investors willpurchase run down properties and renovate them to increase the value. When the time is right to sell, buyers see a greater return on their investment.
d. Portfolio Diversification. Property is one of the largest asset classes and we believe it is fundamental to a well-diversified portfolio. Property investing can be split broadly into the residential, commercial, industrial and retail sectors. An advantage is thatproperty can be both directly owned, such as most residential property, or indirectly owned. Indirectly property can be managed through a fund, syndicate structure or a real estate investment trust.
e. Wealth preservation. We see property as a strategy that ensures our assets grow while providing a legacy for our families. Historically property has outperformed inflation and over the past 20 years has witness that property is key preserving wealth for the future generations of our families.
Historically property priceshave doubled every 10 years and rents have doubled every 20 years. With this in mind I would strongly advise atotal beginner to start looking at starting their property journey ASAP.
However it isn’t as straightforward as opening Rightmove portal, looking at a property, calling an agentand making an offer. We think a total beginner would take the following steps:
- Identify Your Financial Position. This will allow you to establish how much money you have to put towards a property and what you need to raise.
- Educate yourself on investment strategies and choose one. There are many strategies out there and many individuals share this information online for free.
- Pick a Target Area For Investment. This area should be within your budget and have an active rental market.
- Decide Your Property Criteria. What are you looking at buying? Freehold or Leasehold? Commercial? Studio, 1, 2 or 3 Bedrooms? It’s important to getthis criteria right as it will form the basis of your investment strategy.
- Build Your Power Team. To be successful in property you need a power team and for us the below people / companies have been essential to us for our success:
a. IndependentMortgage Broker.
b. PropertySpecialist Accountant
c. PropertySpecialist Solicitors
d. EstateAgents / Property Finder
i. HMO Insurance Specialist Broker
- Create a Plan to Find Deals. Great deals don’t fall on your lap, it’s more like a treasure hunt and you need a plan to find them.
- Have Your Finance Lined Up. We would suggest you speak to you broker arly in your property journey. Their initial advice can crucial once you find your first deal.