How To Develop A Property Investment Strategy
Property Investment needs a plan – you know that already right, that’s why you’ve ended up here.
Where to start though… With property investment you can see the rewards which are attainable when things go well.
How, though, do you get from that stage of just thinking about the pot of gold at the end of the rainbow to being a fully-fledged buy to let landlord?
What we tend to do at this stage is give a little disclaimer – we can’t guarantee that if you follow these steps you’ll become a property millionaire. If only it was that easy…
But whet we can do is give a few tips. At the House Crowd we have a pretty good record for investing in property and seeing returns. We’ll tell you more about us later, but first here’s what we would do.
- Look to spread risk
Spreading risk is one of the most important tasks for any property investor, yet it is also one of the most difficult to achieve, at least initially.
The rationale is this – when you only have one property if anything goes wrong you can find yourself in all sorts of trouble. Flooding or a storm could leave the property unlettable for a period, or you could have problems with tenants, or maybe it doesn’t realise the rental return you expected.
With nothing else in your portfolio to offset these problems, you can easily end up making a loss. Of all landlords with a single property, a quarter are either making no profit or a loss. Can you afford to be one of these?
Yes, when things go well with a sole property you might receive excellent yields and also see the property’s value rise significantly. However, you leave yourself open to potential problems.
To spread risk, you might need to think about the type of property you invest in. Depending on your finds, do you need to buy two or three cheaper properties and rent these out, rather than aiming to get one more expensive dwelling?
This might also impact on where you look to invest, which brings us to…
- Consider where to invest
(there is a blog on this yet to go up, which this can link to as well)
We cover this topic in a separate blog – how to find the best place to invest.
There are tools out there which can help, showing the current yields for every postcode in the UK – you might not know whether Maidstone or Maidenhead is the better investment opportunity, but you can find out.
The key question though is whether you want to invest in an area close to home, or at least an area you know well, or are you willing to chase the best returns wherever they might be?
The best returns are unlikely to be on your doorstep, and property prices might be such that you cannot afford to buy multiple properties.
That suggests you should be willing to invest anywhere, or if not anywhere at least a reasonable distance from home.
However, this requires work and for you to do your homework. Let’s say you’ve found what looks like the perfect town – it’s not too far away, the property prices are appealing and the yields excellent.
But, how much do you know about this town? What type of tenant are you likely to attract, who is the town’s main employer, what happens if a major employer pulls out (for example is it a town perhaps overly reliant on one industry?)
You need to think carefully about where to invest, we pose some more questions in our dedicated blog. What is worth saying is that for many people, property investing is a full time job and treat it like one – spending many, many hours doing research. Just searching for areas on RightMove isn’t going to cut it.
- Don’t rush in
One of the key aspects of a property investment strategy is to treat it like a job, even if you are not planning on it being your job it is jus that for many people.
The days of being able to just snap up any old property in the neighbourhood, rent it out and then perhaps sell it at profit have largely gone. If a property is worth having, i.e. it offers strong investment opportunities then you are unlikely to be the only person to have spotted its potential.
There are also the longer term trends to consider too – what do changes to stamp duty regulations mean for your potential returns and do they alter your approach?
Part of your strategy needs to be to just read as much as possible and also speak to existing landlords, local estate agents and others who can help. You can also do your research on any areas you might consider investing in, perhaps visiting them to get a feel for the area and to acquire some contacts.
You can also use this preparation time to get support in place – for example find reliable, affordable builders, plumbers etc. who can carry out repairs. If your tenants have a leak or faulty boiler, you want someone you know is reliable and charges a fair price, rather than having to rely on 24/7 support straight out the Yellow Pages.
Consider safety in numbers
Can you invest with others? If a group of friends, family or associates are looking to invest then you can share the research, utilise each others skills and of course call upon greater cash reserves – making it easier to jump straight to multiple properties.
This is also where we need to drop in our plug for the House Crowd. We are a crowd funded property investment platform – if you want to know more have a look round the site, but in short this is what we offer.
With the House Crowd, you are one of a number of people investing in a property, and so receive a share of the returns. For example, if you have £50,000 to invest, rather than this being the deposit on one property, it can buy five £10,000 shares in properties – you simply look through our portfolio to find properties of interest.
By investing this way, you benefit both through spreading risk, but also through investing in properties chosen by people with experience in property investment. Our buyers know the local markets and so find properties that should offer long term high yields.
If you want to learn more about the House Crowd, give us a call on 0161 667 4264.
The next steps…
The key things to consider are how are you going to spread risk, where are you going to invest (are there areas to rule out) and how much of the prep can you get out the way.
Whichever approach you take, we wish you luck. Put the work in and there are great returns to be had.