How to make an informed property investment decision

The 9-step process of making a profitable property investment

One of the questions I’m asked most often is how to move from thinking about property investment to taking advantage of profitable property investment opportunities. Fear of investment leads to prevarication and missed opportunity. Jumping in too quickly could mean you haven’t assessed the opportunity correctly, and your investment is less profitable than it should be.

What most investors need is a plan that can be used time and again, a process that ensures you make an informed investment decision and bring your financial goals closer:

1.      List your financial objectives

The very first thing investors do is to think about what you want from your investment. Consider your goals for the future first, and how much money you’ll need to achieve those goals. Maybe you want to put your children through university or create an income for retirement. You might want income now, or perhaps want to invest for capital growth. Property investment is a vehicle that could achieve either or both.

Whatever your objectives are, unless you decide on your destination you’ll never be able to plan the journey that gets you there.

2.      Assess your investor risk profile

You’ll need to assess how much risk you’re willing to take on the way to achieving your financial aims. I find a good way of doing this is to ask yourself what is more important to you: protecting your capital against loss or making a profit? For example, let’s say that you have £50,000 to invest. How would you feel if your investment fell in value by, say, £20,000 in the short term? How would you feel if it made you £20,000 in a few months? Which consideration gave you the strongest emotion – the negative or the positive? If it was negative, then you are more risk averse, and vice versa.

A property investment is a long-term investment. You shouldn’t think it will skyrocket in value overnight. Property values move up and down. There are property investments you can make that provide fixed returns over a medium-term timeframe, while others may provide higher upside potential but with greater risk. The decision of which type of property investment to make will depend upon your objectives, timeframe, and risk profile.

3.      Make sure there’s a contingency fund

It is a vital tool of your financial wellbeing. Before you invest, make sure you have an emergency fund. It should be enough to cover between three and six months of regular expenses. It’s amazing what peace of mind having this money gives you, and how much clearer your investment decisions will be.

Now that you’ve got a set of goals understand the risk you’re willing to take to achieve them and have an emergency fund as financial protection; you can begin to think about which property investment is best for you.

4.      Decide on the type of property investment you want to make

Do you want the capital protection and certainty of return offered by a fixed return investment, or do you want the potentially higher returns of a more traditional buy-to-let property?

5.      Are you an investor or a landlord?

Property investment is great for those who want passive income. Buy it, set it up, and forget about it. Let someone else manage the property for you, and say thank you every month when the tenant’s rent is deposited into your account. Property management services typically cost around 10% of the gross rental – as far as I’m concerned, that’s money well spent.

On the other hand, you might be the kind of investor who has bundles of time on their hands and wants to be personally involved with every aspect of property management. You may relish the 3 am calls to demand a dripping tap is fixed.

6.      Research property investment opportunities

The Location is the most important factor when researching for investment opportunities. Always invest in an area that benefits from strong property fundamentals. Look for shops, schools, transport links, major employers and major investment. It is these elements that will drive present and future demand from tenants and home buyers. It is this demand that will drive capital growth and rental income. The higher the demand, the less void periods you’ll suffer and the higher the rent you can charge.

7.      Find good tenants

While the profitability of your investment properties will be mostly determined by purchasing in the best places to invest in property UK, a tenant from hell could crush your investment returns. Here’s where a good letting agent or full-service property manager begins to prove their value. They’ll market your property, vet prospective tenants properly, and collect rent on a monthly basis.

8.      Maintain your property

Spend time and money to maintain your property. Good tenants will keep you informed of work that needs to be done. This is important, too, because the earlier maintenance work is carried out, the less costly it will be.

9.      Manage your income

Finally, manage the income from your buy-to-let property or other property investments. My property investment blog “The savvy way to spend property investment income” describes how you can manage your rental income effectively to help you achieve your financial goals.

10.    Get a property investing mentor

Before you get your property investment life underway, seek the help of a property investment expert. He or she will be able to guide you to success in property investment, asking the questions that need to be asked and helping you to find the perfect property investment opportunity for your objectives, risk profile, and current and future lifestyle.

Give the team a call on +44 (0)207 923 6100.

Live with passion

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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