At Hawkhurst, we stress the importance of taking a professional approach to Property Investment. We emphasise that all our clients make informed decisions when it comes to this field, so we’ve compiled a list of Property Investment Do’s & Don’ts for you to bear in mind.
Do’s:
- Do research the area that you are investing in and ensure that it ticks all the right boxes with regards to transport links, access to hospitals, schools, universities, shopping centres, who are the key employers locally and what level of employment is there. What level of regeneration has there been historically and what is planned for the future
- Do take advantage of any site visits that are on offer. Any company that encourages meetings with developers and letting agents on site is clearly acting with integrity and in a transparent manner
- Do ensure that you save up 6 months worth of fixed outgoings per property as a rainy day fund. This will cover you in the event of a rental void or the boiler breaking!
- Do utilise the services of a property investment company that proactively works with the mortgage broker, solicitor and developer to ensure a smooth process
- Do engage with Cash Flow Forecasting so that you have a clear vision of what your property investment is achieving for you and now and in the future
- Do target properties that offer a rental yield of at least 5% to protect you from future interest rate rises
- Do seek advice on the benefits of mortgage gearing so that you can leverage against your first investment to buy more in the future
Dont’s:
- Don’t touch any investment opportunity that markets itself as “no money down”. These are highly risky, sometimes illegal and often end in disaster. Property investment must be taken seriously and treated with respect and then it can yield excellent results for you!
- Don’t assume that buying a property near where you live offers you any greater protection than a property 200 miles away. That is an emotional reaction to a business that demands a purely rational approach.
- Don’t put down any less than 25% deposit when investing in property. In the event of a correction in the property market a healthy deposit will shield you from negative equity
- Don’t select an accountant to help you with your tax return unless they can demonstrate a high level of knowledge of property tax, in particular the new rules for higher rate taxpayers. Knowledge of Limited Company purchasing and the use of Declarations of Trust are critical to your ongoing success
- Don’t neglect estate planning – your property portfolio is a business that can provide a residual income to supplement and even replace your core income. Make sure you protect that income source by utilising tax efficient wills, trusts and Lasting Powers of Attorneys.
- Don’t get tempted by property investment opportunities that aren’t mortgageable. Growing a property portfolio relies upon the ability to leverage sensibly during a rising housing market
- Don’t get put off by purchasing costs like stamp duty and processing fees. If you are buying in a rising market and the developer offers you a discount then this will more than cover any upfront costs. Remember, property investment is not a get rich quick scheme – you are in this for the long term.
Have any more questions? Don’t hesitate to get in touch with our friendly team of experts on +44 (0) 345 894 8441. We specialise in UK Property, Overseas Property, Sustainable Land, Property Mentoring, Cash Flow Forecasting, as well as a host of other investment fields, so can be sure to help you.