How Does Property Investment in the UK Work?
If you wish to get yourself into property investment in the UK, you have to do it fully informed on what you can do and what works. If this has been a dream of yours, it is good to know that it can be fully realised, only if your finances are in check. If you want to succeed, you want to make sure you are up for the task. Here is a quick guide on the matter, which can help you determine just that.
What are your investment options?
UK wide, there are different ways to invest in real estate. You are free to buy property directly, but you can also choose to invest differently. The most popular options are:
- Real estate investment trusts – these are investment funds focused solely on property investment. You can choose this method when you want to invest in property. It is easy to get in and out of, due to the fact the funds are pooled. This means a few investors are owning a property together. You get returns based on how well the investments are performing, including the rental income of the property within the trust. The entry point is rather small, making this a good option for anyone.
- Buy-to-let investment – when you buy a residential property with the idea of letting it out, that is a buy-to-let investment. As long as you keep in mind that there are maintenance and repair tasks involved, you can get yourself a net income every month, which should be enough to cover your mortgage payments. You can hire a property manager to take care of the usual tasks involved in maintaining a buy-to-let property.
- Buying a new build – this sort of investment involves buying a new build off-plan. It is risky since you don’t even see the finished property. There is always some chance the developer will go bust, or the property might end up different than how you imagined it. With such risks come certain benefits, like getting a really good deal. You can later sell the property at a profit, especially if you add value by finishing it and redecorating it.
Should you go forward with your investment?
This is a big decision to make. Sometimes, your money will drain as quickly as the returns, or even quicker. You need to know your limits and not overstretch them. Struggling with your finances is the last thing you want. You need to keep in mind that property investment is a long-term decision. It will hardly provide quick returns. This is especially the case with rental property. You may get your money out, but only after years have passed and the monthly payments have piled up in your favour.
What risks are there?
For starters, you need to know the housing market is in constant flux. The prices go up and down all the time and people always change the rentals scene. Investing in a property means a long-term commitment, through all the ups and downs of it. This means if the market is down and you have overstretched yourself, you will be in trouble. You need a lot of research, to minimise the risk and reap the best rewards of property investment.
Can you afford this investment?
You have to consider your expenditure and your income. Budgeting will allow you to determine how well you can perform. Additionally, consider if you can afford a mortgage. Use mortgage lender’s calculators to find out what payments suit you and how much they will cost you per month.
