To save you some time and effort drawing up a list of the pros and cons of investing in property we have made a start on the list for you!
You don’t need to trawl the internet and read 10 books to get the main points; here’s a list of 18 points to consider before becoming a landlord.
The list is not exhaustive, but should give you some food for thought…
1. Property can give you a double return – the income generated from the tenant and of course the capital growth.
2. Investing in buy-to-let property gives you and your money a great degree of flexibility and can be far more challenging and exciting than simply investing in a general savings scheme for example!
3. Rental incomes and potential capital growth offer far more generous potentials for your money than any traditional savings account.
4. Ideally income in the form of rent will fully cover any mortgage payments from the outset.
5. A well managed investment of this type can indeed offer you everything you hope for, but there are still negative considerations you need to be aware of and potential risks you should not ignore.
6. Do not neglect the management side of your property or your tenants. Keep on top of the property, keep on top of your tenants. Do not let the management of any areas of your investment fall by the wayside, be dynamic and stay in charge.
7. If the property declines in value as it is not properly maintained then your capital investment will actually reduce in value. The property will become unattractive to let to future tenants and you could lose this income and then have to pay out a great deal to get your property back up to standard and in a position to be attractive to tenants again.
8. Sure, you can employ agents to let and manage your property thus reducing your need to be so hands on and involved. But such people charge a relatively large percentage of your income and they don’t have a personal interest in your property. Are they likely to do as good a job as you would yourself? Do it yourself if you possibly can.
9. Legally things are looking up for landlords nowadays. As it becomes more socially acceptable to rent so it becomes more acceptable to charge fair rents and the law is on the side of the landlord far more when it comes to difficult tenants and retrieving your property from their hands!
10. The introduction of ‘buy-to-let’ mortgages and the fact that financial advisers are now well versed in this type of investment opportunity means that there is far more help and advice available to you before you make your final decisions. You can speak to one of our partner consultants if you would like to find out more about the financial and taxation possibilities and considerations.
11. Despite the Bank of England’s interest rate hike yesterday and analysts’ predictions that the cost of borrowing could reach 5% by the end of the year, there are still some extremely competitive deals out there and it is most certainly a buyer’s market when it comes to mortgages! Shop around and do some serious research – independent mortgage brokers and financial advisers are there to find you the best deals.
12. Investing in residential property for rental purposes is not your only buy-to-let choice – commercial property in the form of shops, offices, warehouses or even retail complexes can offer the potential for a decent income and steady capital growth.
13. Though there is a risk with any investment, investing in property rarely means you can lose every single penny of your investment unlike investing in stocks and shares for example, where you can potentially lose everything! If you keep up any mortgage payments you can always sell and get return on your capital. Even if the bottom falls out of the property market again, you’ll still have your bricks and mortar! Investing in property is generally considered a ‘safe’ investment alternative nowadays.
14. If you look at investing in property in terms of the potential risk versus the potential reward you can see that it has a lot to offer. But consider what you want to achieve – and then compare the alternatives. For example, if you’re looking for an income in retirement compare the investment in property to the investment in a pension and then consider the potential returns of both. Know the alternatives, know the possibilities and realities. Speak to a financial adviser for independent advice and a fresh perspective.
15. Location considerations are just as important when buying-to-let as when buying your own home…in fact they are possibly even more important when buying-to-let! You might fall in love with a property that is just a little further from amenities than ideal when looking for your dream home. A tenant will want amenities on their doorstep, good public transport links and to rent in a ‘decent’ area.
16. A further consideration for residential property is buying within decent commutable distances to large towns. A remote rural property may be ideal for you, but are you going to find tenants? Are you going to keep finding tenants?
17. The location considerations are also applicable when investing in a commercial property. The type of property will dictate the considerations you need to make though. If you’re investing in a hotel, make sure it is one in a popular location. If you’re investing in offices make sure they are easy to get to, have parking or decent public transport links. Warehousing? Again, decent transport links, but in the form of access to motorways or airports.
18. Investing capital that you may need to access quickly into property may not be the best consideration especially when it comes to commercial property. Though the residential property market is fairly fast moving the commercial property market is slow in comparison. And selling a property involves a set process that can you can generally not speed up. Chains, raising finances, solicitors and surveys are all outside of your control. Make sure you have a cash portion in your investment portfolio that can cover you in the short term. ‘Cashing in’ property can take time.