Property investment is a big deal and, for some, it can be the most significant capital commitment made in a lifetime. Even for those who manage large property portfolios across multiple investments, the significance and magnitude of the venture, should not be taken lightly. Deciding whether to invest in property will need to take account of a number of different considerations. As with any investment, there are always risks involved, which, if not fully understood, can make the difference between success and failure.
What can property offer investors?
Investing in property is mostly regarded as a beneficial way to invest capital. With property investments, there are two main potential ways to make a return:
- Rent – income is earned by letting out the property to tenants
- Selling for a profit – from buying a property and selling later at a higher price
Even if you don’t wish to buy a property yourself, you can get these potential benefits indirectly too, by investing in a property fund that invests directly in property. In addition to this, there are other ways to invest, for example through property maintenance and management companies. In most instances investing in property should be considered over the medium to long term as there are a number of costs involved in investing, such as:
- Solicitors’ fees: These will be composed of conveyancing fees, land registry fees, bank transfer fees, disbursements, search fees and other associated costs. They can mount up!
- Stamp duty: This applies to properties over £125,000. The rate you pay depends on the purchase price of the property.
- Agents’ fees: Estate agents usually charge a percentage fee, which can be anywhere between 0.75% and 3.5% of the agreed selling price, depending on the type of contract you choose. The fee is open to negotiation, so be prepared to haggle.
The type of property you choose to invest in will also involve different considerations, for example, residential properties (e.g. flats and houses), or commercial properties (e.g. shops, offices and factories).
This well-known agents’ cliché is true and vitally important in all situations if you want to invest in property. Location considerations for each of the different types of property should take into account of the following:
- Flats – Investors need to consider whether the location is one that would suit a potential tenant, for instance, is it near to an underground station?
- Houses – For example, when considering purchasing a family house, the schools in the area, and the OFSTED rating of these schools, can have a significant impact on the attraction to potential tenants.
- Commercial properties – For example when considering a retail unit, some research is required to establish if it is in a good trading position close to other retailers. With office buildings, factors such as parking facilities and local amenities like train stations, bars and restaurants will all play a part in the attractiveness of the location. In the case of factories, accessibility for large vehicles is vital.
Investors should be prudent when considering property. Provided the key factors have been thoroughly researched, the risks can be minimised and the investment should reap its rewards. It is also important to bear in mind that the capital outlay doesn’t stop at the purchase price and numerous fees involved at the start; on-going costs, such as maintenance, service charges, etc., should be well researched and factored in early on before any decisions are made to invest in property.
Employing a qualified property management company, such as David Charles Property Consultants, who can fully research the investment opportunity and estimated costs, is a highly recommended option, to ensure no stone is left unturned, and that investment choices are wise and well-considered. To find out more about how David Charles Property can help you with property investment, and help you to make an informed decision, contact us here.