A tactile and typically long-standing investment strategy, real estate investments are looked upon by many entrepreneurs and investors as one of the strongest additions to any successful financial portfolio. Not only do they provide a solid backbone to diverse range of investments, but they are also less volatile than the likes of stocks and shares, which is extremely important for peace of mind during periods of economic uncertainty.
Interested in looking into an investment property venture in 2021? To help get you inspired, take a look at this quick list of 5 key factors to consider when investing in property.
Do you have the right amount of capital to invest?
It goes without saying that the first thing you should consider when going ahead with any investment strategy would be the amount of money you realistically have available to invest. When putting your money into an investment it will often be inaccessible for a long period of time (particularly in a long-term strategy like property), so you need to make sure that you are secure in the event of financial emergency, or in terms of any existing commitments/payments.
Of course, there are a range of different property types out there, suiting a range of different budgets. If you’re unsure of the best course of action to take within your price range then you could start by contacting a financial advisor or consultant for next steps on investing your capital correctly. Buy to let mortgages are also something that you could look into.
Are you investing in the right property type?
From standard properties and apartments, to HMOs, hotels and even retirement homes, there is a wide variety of different property types out there depending on your interest. Each has their own set of pros and cons, so do some research on the different types out there and think about which might be the right decision for you.
As an example, some investors like student property, due to the typically high demand and also the high rental yield averages. Rental payments also tend to have a bit more consistency, with students getting their loans through in a bulk sum and so paying off rent in larger instalments.
Are you investing in the right area?
As well as deciding on the property type, you also need to make sure that the area you’re investing in is going to be lucrative in the long term. You might have an incredible property at a great price, but if there’s no demand or room for growth in the surrounding area, then your investment might stagnate and struggle to grow in the years to come.
If you look at the UK at the moment, for example, award-winning company RWinvest state in their guides that the North West is leading the pack (in cities such as Liverpool and Manchester), providing not only the highest rental yield averages in the UK but also the best capital growth potential. Liverpool in particular is enjoying a large amount of development in its waterfront, meaning that tourism and demand to live in the city is again only set to exponentially grow, which spells good news for investors who are rooted locally.
Do you have potential tenants in mind?
If buying an investment property for buy-to-let purposes – where you purchase an apartment/home and then rent it out for rental return – you also need to think about attracting tenants so that you’re receiving a consistent income from rental payments, and avoiding void periods where the property is empty. Think about the sorts of things that make your property an attractive prospect in comparison to some of the competition out there, and look at surrounding points of interest that could be leveraged when investing in an area.
Are you a hands-on or hands-off investor?
To finish, one thing that you should certainly ask yourself when thinking about another investment project is how closely you want to monitor and micro-manage your project, or how much time you can afford to allocate towards it. If you’re someone that already has enough on their plate at the moment, for instance, with existing commitments and projects on top of work, you might think that property is too time consuming to get into, but that isn’t the case.
Depending on the type of investment strategy you want to go with, buying property can be completely hands-off. If you look at buy-to-let apartments in city centres, for example, many have dedicated management companies that deal not only with tenanting the properties but dealing with the overall running of the building and the day-to-day minutia, too. This means that investors can simply collect their rental yield payments on a consistent basis, watching from afar as they please and providing a small percentage of the yield to the company as a fee.