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Expert tips for investing

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Expert tips for investing

Whether you’re buying your second home or your twenty second, investing in property requires a methodical and calculated approach together with a clear strategy.

Although there are no hard and fast rules to property investment there are a number of actions you can take to improve your success rate. Below are 4 areas worth considering before you take on the responsibility of an extra home, each designed to maximise your return, drive growth and make your investment worthwhile.

Research your market and location

If you are looking to rent your property, location is everything. Before you buy it pays to get to know a little more about the area you are interested in. That includes finding out more about the rental market and your prospective tenants. It is also worth looking at the competition and the homes already available to rent. This will give you an idea of the average rent and type of property the area’s tenants are interested in. It will also give you a clearer steer when it comes to furnishing your property.

Don’t underestimate the cost of ownership

Buying a new home can be more expensive than you think. If you need to arrange a mortgage you will need to factor in arrangement fees, stamp duty and all of the other costs associated with purchasing a new home.

If you are looking to rent or own a second home for a long period of time, it is important to factor in ongoing maintenance costs, before you make a purchase. You will also need the funds to cope with major repairs, such as a new central heating system or a leaking roof.

Improve your credit rating

Reducing your reliance on credit cards and loans is not only good for your cash flow, it could help improve your credit record and make it easier to secure loans and mortgages in the future.

Yield is king

As every successful property investor will tell you, your yield, or return on investment, is key. Before you buy any property you should do a few simple calculations. These should cover the following areas:

  • Your projected annual rent
  • The home purchase price
  • Your initial acquisition costs
  • Your initial deposit
  • Your projected interest charges from any loans or mortgages
  • Any expenses incurred in securing tenants, maintenance and administration
  • Any tax you will be liable for as a result of your investment

To find out more about current investment opportunities and our full suite of investor services, please contact Persimmon.