Property investment is a business. It has its own particular characteristics, but it also shares a lot of fundamental traits with businesses in general.
One of those traits is that setting out a clear business plan is often crucial to long-term success and should ideally be undertaken before you begin your property investment journey and updated regularly as you progress in line with your changing circumstances. Even if you are already involved in property investment, taking some time out to review and preview could be a very worthwhile exercise.
Start with the why
Why are you interested in investing in property? The answer to this question has to be something more specific than “to make money” because there are plenty of other ways to do that. What, exactly, has attracted you to an investment property for sale as opposed to any other kind of investment? This should help you gain an insight into your real motivation, which should always inform your decision-making processes.
Decide whether you are mainly interested in capital gains or yield
There are basically only two ways to make money from any investment, including property, namely capital growth and yield. Knowing your motivation for investing in property will help you to decide which one to target. For example, if you know you have a major life event coming up in five years or so, perhaps a child going to university, then you might look for properties where there a reasonable expectation of locking in good capital gains during that time. Alternatively, if you are looking for a means to pay your bills regularly in retirement, then rental yield is likely to be your better option.
Size your goals to your resources
Every so often there is a story about an investor who made a tiny investment and promptly became an overnight millionaire. It can happen, it does happen, but it doesn’t happen often, not even in the most vibrant and buoyant of property markets. Generally speaking, people with smaller investment funds can expect smaller returns than those with larger investment funds and hence should set their goals and expectations accordingly. On the plus side, those smaller gains can still add up over time and create very meaningful returns.
Set processes in place to manage your portfolio effectively
Astute investors think ahead and manage their resources to deliver the best returns. One of these resources is your time and given the legalities around managing property these days, particularly residential property, there is often a very strong case for using letting agents deal with the day-to-day running of a property. You might also with to enlist the services of a proper accountant to ensure that you hold on to as much of your hard-earned profits as you possibly can.
Define an exit strategy
You may have no immediate plans to exit the property market, you may never intend to exit it, but it is still wise to have an exit strategy in case your plans change as life does happen and yours may lead you in directions which are unexpected, even if they are welcome.
For more information on UK property investment, please contact Hopwood House.