If you’re looking to invest in property, here are some basics in today’s market.
- Understanding the market
The property market does change and it is different to what it was ten or even five years ago. For starters, there are several incentives now for first-time buyers. This means depending on the property and the area, the lower end of the market might be slightly more competitive.
When reviewing the state of the market, key points to consider include:
– tax implications. We have some great tax deductible benefits, but this may change. For instance, last year, the government bought in new depreciation laws.
– interest rates. These are currently at record lows, and the chances are they will increase within the next five years. Make sure you have planned accordingly.
– change in demographics. One week an area is hot, the next week it’s not. There are some definite favoured locations in Newcastle, and we can’t actually see them changing in the next few years. However, there are some up and coming areas and occasionally an area does seem to drop in popularity. Do your homework on an area to see if there are any factors which may affect , such as major roads or rail links, might affect an area’s popularity.
- Check your maths
We cannot stress highly enough how important it is to make a budget and factor extra in for unexpected expenses such as rate rises or for periods of time when the property may be empty.
Be realistic with your rental income; while a high rent will mean greater profit, if you can’t find a tenant willing to pay a high end rent and the property is empty, can you still pay your mortgage? Factor into your budget a lower rental income so you’re not taken by surprise and have unexpected additional costs if you can’t find a tenant willing to pay top dollar.
Once you’ve done your sums, check them again just to be on the safe side!
- Make your strategy
Some reports say the days of capital growth are dead and you should be focusing on rental income. However, Newcastle saw good growth last year and there were record prices; whilst the market has slowed a little, so far in 2018 there is plenty of property still changing hands. What we have noticed is there are no longer the big queues of people at open inspections and buyers now can have a think about the property before having to jump in.
Capital growth is still there, but you might want to factor in the profits you may get from any rental income, or be sure being in negative equity definitely works in your favour.
- Be organised
Keep proper records of revenue and expenses, and make sure you keep receipts. If you don’t keep proper records, you will have no idea of how profitable (or not) your property is – and it will make lodging your tax return a nightmare. If you have a good property management agent, you should receive a breakdown of expenses on a monthly basis anyway, and they can even give you an end of financial year statement.
- Start small
If you’re new to property, we suggest starting small and keeping your risks to a minimum. Once you are comfortable with how you’re operating, then think about expanding. Don’t over-stretch yourself or you may find you’re having to sell the property if a major issues arises because you can’t afford the repayments.
When you’re considering becoming a property investor, make sure you get good financial advice off an experienced professional.
We do more than simply manage and sell property; having been in the business for over 40 years, we’re keen to share our knowledge and experience to help you get the best out of your investment property. Get in touch if you want to know more!
Give us a call on 02 4954 8833, send us an email to email@example.com or pop into our Cardiff office for an informal chat.
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