To avoid sinning when investing in property, try to follow these 10 commandments and you should be on your way to a heavenly investment experience. The following points are a simple guide on what should be taken into consideration before investing in property for the first time.
1. Thou shalt decide on what you expect from your investment.
There are many ways in which to invest in property and different types require a different amount of capital. Before you choose one strategy have a look at others and choose the most beneficial to your needs and expected return.
2. Thou shalt leave your emotions at the door.
When searching for a property, particularly a Buy to Let property, don’t choose it because you like it. You should think about what type of tenant and rental income it will attract.
3. Thou shalt not forget about additional costs.
When you are deciding on how much capital you want to invest in property it is important to take into account legal fees, stamp duty, service charges, ground rent, contingency to accommodate void periods between tenants etc.
4. Remember to carry out full research and due diligence.
Once you have decided on what type of property you wish to invest in it is important to carry out full research and due diligence on all of the components such as the area, projected income and developers.
5. Honour regulations, laws and taxes.
This is an important point to take into consideration as failure to do so will get you into trouble, not just financially but convictions may be made against you if you fail to comply with relevant regulations and legislation.
6. Thou shalt not be taken in by gimmicks.
Be cautious of marketing ploys particularly "no money down" deals, "get rich quick" schemes or developments where you are under pressure to sign up quickly to secure a deal.
7. Thou shalt not forget to seek advice.
Take advantage of the advice available. Some companies and organisations provide advice from investment experts without charge, make the most of this. Although specific legal and financial advice should be sought from professionals in that particular sector. Also you should not rely on anecdotal evidence alone.
8. Thou shalt balance the books.
Ensure that outgoings do not exceed income. This is often the case when leverage is used to invest in property and mortgage rates fluctuate according to interest rates, this should be taken into account when taking out a loan, for example you could put aside contingency funds to account for this.
9. Thou shalt take into account the risk of investment.
Some types of property investment are riskier than others. Higher risk does not necessarily correlate with higher profit.
10. Thou shalt not forget about alternative property investment strategies.
If you do not wish to invest in property directly there are alternative options that can provide security in a market downturn.
Property investment may be a daunting process, but if you take these points into account when investing in property you should find yourself on the right track, hopefully this brief guide will clarify the process for you.