Property investment is known to be a successful way to increase your overall wealth over a period of time. Along with all the stories of investors getting it right and making considerable income from their portfolios, come the tales of those who have not made money and may have even made a bad property investment.
There are a lot of myths that potential investors might be led to believe and misconceptions about investing in property, here we hope to address some of these and help you decide whether a rental investment is the right option for you.
1. There’s no money in property anymore
Property prices may not be increasing at the rapid rate they were a few years ago but that doesn’t mean there’s nothing to be gained from property investment.
The only difference now is that investors need to be savvier and get good tax and financial advice from the relevant professionals.
Finding the best possible property and buying in an area which has excellent potential for capital growth are two key factors in ensuring you make money from your investment.
2. You need lots of money to invest in property
Of course having lots of cash in the bank would make it far easier to begin investing in property but it’s not a necessity. Borrowing money is still cheap in percentage terms compared to previous rates meaning in most cases it’s in fact better to divide your capital and arrange financing to maximise your investment potential.
It is true that there is usually a requirement for a larger deposit on mortgages for investment properties over those purchasing their main home. It is also the case that the banks are strict on buy-to-let lending and have considerably more hoops for investors to jump through than they may have done previously so it’s important to get good advice and not overstretch your finances.
3. Property investment allows you to get rich quick
We have heard the stories, the tales of individuals who’ve purchased a property in January only to sell it in April at a hugely increased value to pocket a large profit.
The reality is that the most successful investors are those who plan their investments with a long-term view.
4. Any property will do
One myth about property investment is the idea that any property will do, it doesn’t matter what you buy it will work out to be a good investment. The UK property market has created conditions for this to work out at certain points for a few; creating success in property investment now requires research and knowledge.
5. House prices will always rise
Overall history shows us that property prices generally move in an upward trajectory in the long-term. Whilst this is true it cannot always be relied on over a short period of time as different areas see prices rise and fall for a wide variety of reasons.
Infrastructure, regeneration and redevelopment are all important factors to consider of an area when looking at whether or not prices are likely to increase. Research is key.
Some areas which are less developed or are due to undergo a large regeneration program might take many years to reach their full potential. New transport connections might be promised but might not actually be arriving for 5 years.
There’s also a significant difference between proposed plans and those which are approved and going forward. Those which are only proposed or in the early stages of planning might not ever go ahead so relying too heavily on them to increase the value of a property might be foolish. The saying ‘speculate to accumulate’ does apply but with a sensible head and consideration for what is actually likely to have a positive impact on property prices in an area.
6. It’s all about capital growth
Leading on from point 5, and the long-term focus rightfully being on purchasing property that has good potential for capital growth – income in the short-term is also important.
Rental property has the potential to also produce an ongoing income via rent. Wise investors will focus on finding a property that offers a blended return – one with prospects for both capital growth and rental yield.
7. Too many rental properties available in one area
Investors might worry that buying in an area or within a building where there are or are shortly to be a lot of rental properties available, saturating the market potentially effecting the value of the property and whether it is let.
Market forces will have a huge sway on this; ultimately if there is demand for the type of property you’re buying then it will let and for the correct market value.
8. Now is not the right time
There are locations in the UK right now that are currently offering outstanding rental opportunities that previously did not exist. Now might not be the time to invest in a location that has peaked, that is currently seeing price falls or where the future potential is weak but there are other areas which have excellent rental properties on offer.
There isn’t a bad time to invest in property as a general statement, there’s simply a variation in where and what to buy.
How can we help?
We’re happy to guide you through your property investment, to separate the fact from fiction enabling you to make a well-informed purchasing decision. For more information contact us on +44 (0) 2039507939 or send us an email at [email protected].
