Real Estate Investing for Beginners – Where Do I Start?

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Real estate investment is one of the most popular kinds of investment in the UK, and for good reason: you can see where your money is going, you are investing in something tangible, and the real estate market is considered to be a safe investment opportunity. But if you’ve never invested in real estate before then it can also feel very daunting. How much money do you need to invest in property in the UK? Should you seek expert advice? Here are five things to consider when investing in real estate:

1. Conduct Extensive Research

Like any kind of investment, investing in real estate isn’t something you should undertake without extensive research to ensure that you know what the current market landscape looks like, and can adjust your approach accordingly. Are property prices currently rising or falling? What do interest rates look like right now? And what kind of properties are most attractive to renters within the current market? You should undertake extensive research and be in a position to answer all of these questions before you begin to invest in real estate. Research is important because it helps to minimise the likelihood that you will make mistakes as you begin to invest in the real estate market. 

When conducting your research, you should also research the right location for your property investment. The right location will be desirable to prospective tenants, offer a high rental yield, and be close enough to your own location so that you can manage it efficiently. A property with a high rental yield is crucial for earning a return on your investment, whilst its location will make or break the likelihood of you securing that high yield. 

2. Talk to The Experts

If you’re new to real estate investing, then the best way to ensure you’re making the right choices and that your investments are protected is to seek expert advice. Expert advice will help by guiding you to tailor your investments to your budget and your unique needs, examining your assets, assessing your investment potential, and developing a strategy to get you to the position you’re hoping to achieve from investing in real estate. Services such as those offered by Propertyze can provide significant support to first-time real estate investors. Experts that have a better understanding of the current property market, have invested in property before, and know how to help you reach your investment goals are best placed to guide you through the investment process. 

3. Understand Your Purpose

It might seem like an odd question, but what is the purpose of your decision to invest in property? Why are you choosing to invest? Investing in property is a high-value investment and one with low liquidity, so understanding your purpose will minimise the risk of any mistakes, or putting yourself under unnecessary financial risk. You typically have three options if you’re planning to invest in real estate:

  • Buy and lease. This type of investment will offer a regular income whilst allowing the long-term value of your property to continue to grow. However, you will need to be prepared to be a landlord and to deal with all of the red tape that comes with the role: managing contracts and tenants, undertaking repair work, and dealing with any tenant disputes. 
  • Buy-and-sell (short-term). As the name suggests, this type of investment has a fast turnaround and will generate a small to medium level of profit. With a short-term buy-and-sell investment, you will buy a property that is either under construction or in need of renovation and then sell the property for a profit when the work is completed. 
  • Buy-and-sell (long-term). This is a long-term project, where you invest in property and then watch its value grow significantly over a long period of time. Often these properties are used as second homes or holiday homes and are used as part of a long-term retirement plan. 

4. Ensure You Have the Capital You Need 

Investing in real estate for the first time is likely to require more capital than you might expect, and it’s important to ensure that you have positive cash flow available. Positive cash flow is key to a good rate of return on an investment property. For this reason, it’s important to take the time to do your sums and know exactly how much money you will need.

Many first-time investors fail to think beyond the property price of their chosen investment. They often don’t budget for or consider any additional costs that are associated with investing in property. But there are many additional financial commitments you must take into account, and it’s important to ensure that you have the capital available for these. This includes, but is not limited to: taxes, insurance, property valuation and inspection costs, insurance and solicitor fees. Once you know what your investment budget is and you are aware of how much capital you need, you should stick to that budget. It can be tempting to invest a lot of money into property, especially when you’re new to and excited about property investment, but if you overstretch yourself then you are only setting yourself up for problems further down the line. 

5. Know Your Credit Score 

Finally, although it may not seem like a significant element of your real estate investment plans, it’s important to know your credit score. This is because not only does your credit score impact your ability to qualify for a mortgage (if you need one to achieve your investment goals) it also impacts the terms that your mortgage lender will offer you. This is because if you have a higher credit score, you are more likely to gain better mortgage terms. This can add up to substantial savings over time, which will help you to maximise the financial gains from your real estate investment. For this reason, taking the time to know your credit score is important if you’re investing in real estate for the first time.