2020 brought many things to our door - the pandemic being the biggest - but everything from Blacks Lives Matter to the Beirut Explosion created uncertainty and disarray in the world; thus causes uncertainty and disarray in the economy housing market. The mini 'Boom' which presented itself in the UK market after the 1st lockdown, lasted longer than most experts would have anticipated, leaving savvy investors sitting on their hands until the chaos lifted. The overall opinion now is that 2021 is the year to buy property, as the prices begin to drop through the recession - and its never been more important to go back to basics to ensure that you are making a good investment decision. We believe there are 5 key considerations to ensuring you make a safe property investment.
Whether you think you can or you think you can't, you're right - a saying that is all too true when it comes to investing in property, or risking your capital in any way for that matter. There's a lot of money involved when buying property and it naturally makes many of us too nervous to take the plunge. There's also a lot of common misconceptions in property, such as not to buy in a recession, but in fact this is the best time to purchase property as prices are low; you make your money in property when you buy, not when you sell as many perceive to be the case. Either way, you need to get in the right mindset to feel comfortable with investment and risk - gaining knowledge of the property market through following news, reading property magazines, or perhaps seeking out a property mentor for guidance can help dispel those fears.
One of the main things that happens with new, enthusiastic property investors is that they see a property they like and they become attached to it, and thus purchase it without understanding that property is going to work for them in that specific area. There are a variety of free and purchasable online tools available to help assess if an investment area is going to work, as such Propertydata.co.uk and Nimbus Maps. Another idea which greatly helps to better understand an area is by speaking to the people at the forefront of the property market such a lettings and estate agents, and even the neighbours - all these people will give you honest accounts of a particular location; wheres good, wheres not so good, where to absolutely avoid, where the best yields are etc.
It's very important that when you’re looking at a property of investment, you understand what strategy you’re going to use to ensure that the property will provide the returns you’re looking to achieve. There are a number of different strategies including:
- Buy To Let
- Flip
- House Of Multiple Occupation
- Commercial Property
- Developments
The 3 main foundation strategies are generally property flips (buying distressed property, renovating it and selling it on the open market for profit), Buy To Let (family/ couples rentals) and HMO (House shares; professionals or students sharing communal facilities such a kitchen and living areas). It's vital that you understand the market trends to know which strategy to use when.
Another huge consideration when investing in property is understanding if there's any demand for the strategy you want to deploy; and theres a few different ways in which you can do that. Major property sites such a Rightmove, Zoopla and Spareroom have some fantastic tools on their websites to help you understand demand. For example, you don’t want to buy a house to flip in an area where 83% of the properties are family rentals; that’s often where people start to loose money.
Security
The final thing to consider if you're looking to invest as a Joint Venture with someone else, or through a company is Security. The good news is that there's plenty of things that are available to give you the reassurance and peace of mind that your investment is secure. Security is not a one size fits all approach as everyones risk profile is different. Generally all investments through companies are secured with a legally binding loan agreement through a solicitor as a minimum, and then additional security such as 1st and 2nd charges over a property or restrictions are also offered to ensure a safe investment. In some cases, for larger projects such as developments, temporary shares in the company are offered. If you are looking at the Joint Venture route, you may want to consider setting up a separate temporary company with your partner as a way to safeguard all your other assets.