property-investmentAs demand for rental homes continues to exceed supply, could now be the right time for you to invest in the property market?

Unlike other forms of investments, property investment presents you with scope and choice. This is why it has always been popular and remains a strong investment option for many of us today.

As with any investment opportunity, the property market does come with its ups and downs; with factors such as the economy strongly affecting the market, it has become a hot topic, often raising probing questions about the future of the market. Ultimately, it is important to bear in mind the unique selling point with property,  it is a tangible investment. Unlike stocks and shares, when you invest in a property you will see exactly what you are getting for your money.  Furthermore, investing in the property market gives you greater control over how much to invest and the future development of your investment. Investing in the property market can create many opportunities; allowing you to cash in when the time is right or invest further to create a portfolio.

As with any investment, it is important you know exactly what you would like to achieve and have a robust plan of action. To help get you started we have put together a five step guide to ensure you make an informed choice.

Research your market 

Knowledge is key. When it comes to any investment the first step would be to do your research. The property market varies greatly from region to region, so it is important that you are fully informed about trends within your local market. Take a look online and evaluate the stock that is currently available in order to get an idea of the income you could generate. This may sound like a business approach, but ultimately this will be a long-term investment so it is important you have a full understanding of the market and can prepare yourself for what to expect.

target-audienceKnow your target market

Now that you are fully informed of key trends and your local market, it is important to consider what type of investment you would like to embark upon and the market you want to attract. Your research will have allowed for you to identify if there is a gap in your local market for a certain type of rental. Rental homes are always going to be popular for young professionals and families, and now also appear to attract older tenants for a carefree retirement.

Knowing who your market is, as with any business, will determine many fundamental decisions for your investment, including where you buy, what to buy and how you market the property. The requirements from you and the property will vary according to your ideal tenant, with trends such as frequency of let, quality of tenants, property maintenance costs being factors you may want to consider.

Where to invest

Once you have determined your ideal tenant and the market you would like to enter, you can fully assess what you audience requirements are. This will allow you to assess where your search should begin. For example, a young professional’s key requirement would be easy commuter access, so consider centrally located properties that are close to stations and major road links.  

It may also be worth researching your local area to identify any ‘emerging’ towns which will potentially benefit from major investments. Farnborough forms one of these within our area, so it may be worth looking into the market opportunities here as these area enhancements could instantly boost the popularity of the town, proving it a worthy investment.

researchDo the maths

This is a vital factor when it comes to any investment. You must let the money do the talking, ultimately this will be the indicating factor of whether it makes a worthy investment. Start by calculating the yield to determine whether this is a viable investment, aiming for circa 4%. At the same time, it is important to consider factors such as cosmetic costs, management/grounds expenses for leaseholds. Put together a budget spreadsheet, as this will give you a good idea of what to expect over the course of the year. It would also be an easy way to incorporate contingency costs into your budget. Generally speaking, this will give you a stronger and more accurate outlook on the anticipated returns of your investment.

Finally, try to detach yourself from the properties you are viewing, as you will not be living in it yourself. As such, factors such as decoration and personal preferences should not distract you from your decision.

Managed property rentals

Managing a property rental can be a time-consuming process. With tenants exceeding the supply of rental homes, it is easy to presume letting a home and managing the relationship afterwards would be easy. However, finding a quality tenant is not always as easy as it seems, which is where our lettings department could help you. We can streamline the process for you, determining the quality of prospective tenants and selecting a reliable tenant with the security of knowing all the administrative requirements have been fulfilled. The lettings industry is regulated by many laws, which is not easy to keep onto top of. Running right to rent checks, ensuring EPC requirements have been fulfilled is just a small element of what our lettings team could help you with. The pigg-bank-2upheaval of repairs and maintenance, as well as the smooth changeover of tenants are also advantages of using a property management service. Having a team to manage the let for you can take a weight off your shoulders, particularly if you have a full time job and a family to attend to.

Build a portfolio

There is scope to develop from an initial property investment, by creating a portfolio. Having a diverse portfolio of properties will allow you to enter different markets and present you with a protective mechanism to secure all your investments. If, for example, you were to experience a shortfall from one of your investments, you will have other means of income to rely on as an overlay. Ultimately, a portfolio can present you with a protective barrier, anticipating a better chance of long-term success.

We hope this guide supports your bid to identify a viable property investment with confidence. If you would like further advice or a valuation please contact our lettings team on 01252 514000 or lettings@mackenziesmith.co.uk.