11 steps to refine property investment strategy

Moving from planning to taking action

A couple of weeks ago we published a series of property investment guides that discussed seven considerations before investing in UK property. In this article, I’m going to look at the action points of a basic property investment strategy. This is the step-change between thinking and planning to doing.

Following these 11 steps will help you to refine your property investment strategy, keep on track with your property investment plans, and get the best help you can when you need it. For ease of reference, I’ve listed these nine steps under four major headings:

  • Knowing why you’re investing in property
  • Finding the best property investment opportunities
  • Getting the financials right
  • Working with the right people

Knowing why you’re investing in property

The first thing you should do is to understand why it is that you’re considering buying an investment property or expanding your property portfolio. Residential investment property could provide the route to lifestyle-changing income, or capital gains that enable you to live your dreams. The key to unlocking the door to this potential is to know why you’re investing.

Step 1: Be clear about your property investment objectives

Do you want to create a passive income, or make investments for capital gain?

A buy-to-let investment strategy is a long-term commitment. You’ll have to decide whether you want to take a visible and active role in the day-to-day management of your investment property or to employ the services of a professional property management company. A buy-to-let investment property portfolio could provide a growing income from rental profits, as well as benefit from the rise in the value of your investment properties.

On the other hand, you might have a get-in, get-out investment strategy (otherwise known as ‘flipping’). It is shorter term, and profits can be more volatile – you’re reliant on the property market doing exactly as you want it to in a specific and shortened period.

Step 2: Remember that an investment property is not your home

Whatever your investment objectives, avoid falling into the mindset of a home buyer. Your property purchase is an investment, not a home. Disengage as a home buyer, and engage as the buyer of a box that makes money.

You’ll have to consider what type of property you want to invest in, too. An existing property may be cheaper than new build, but it’s been lived in and could require some extensive work to bring it up to scratch.

New build properties have the benefit of being modern, clean, fresh, and with lower (perhaps even non-existent) maintenance bills. Very often, the rental price of new build properties is above that of comparable existing properties for all these reasons (prospective tenants tend to love the idea of living in a home that has never been lived in).

The off-plan property allows you to benefit from the advantages of new build while staging your payments. You’ll fix the price in advance, meaning that if the market value goes up, by the time you complete you will already have made a capital gain on paper.

Finding the best property investment opportunities

Finding the best property investment opportunities means investing in the best locations. You’ll find these by ensuring that the area in which you buy benefits from all the property fundamentals: shops, schools, transport links, major employers and major investment. In the next few steps, I write about the needs of tenants, but home buyers have the same requirements.

Step 3: Go shopping for shops

Your tenants need to be able to conduct their daily life easily and conveniently. Properties that are near shops, off-licences and takeaways will be in higher demand. Look for large shopping centres, small shopping malls, and local shops in walking distance for emergency and convenience goods (such as bread and milk).

Step 4: Get informed about schools

Your tenants may have children, and they’ll want to be within the catchment area of good schools. Properties here will command a higher value and rent more easily. You’re looking for junior schools, senior schools, universities and colleges.

Step 5: Make travel easy with great transport links

Most people commute to work, even if it’s a short distance. Road, rail and bus links will be vital. It is especially true if your target tenants are young business people. Think also about tenants who may have to travel locally for work. Look for airports, bus routes, train stations and major roads.

Step 6: Make property investment light work with major employment

Prospective tenants may be looking for a fresh start. There may be few job opportunities where they currently live. An area with a good local economy will present better opportunities for landlords and investors. Properties that are within easy reach of employment opportunities are more sought after. Look for areas that benefit from numerous major employers of over 100 people, lots of small and medium-sized enterprises, and employment hubs such as industrial parks, shopping centres, city centres, and built up areas within easy reach.

Step 7: Invest where there is significant investment

Find out what major investment by local and national government and industry is planned, budgeted, and underway. Look for plans for new buildings, roads, leisure centres, and other developments. Do any major companies have plans for relocating to the area? The answers to these questions will give you a big clue as to the area’s economic prospects.

Getting the financials right

If you don’t get your financial plan right, your investment property will not pay its way. You’ll need to consider rental income, expenses, and tax.

Step 8: Project your cash flow

Everything may look rosy now, but no one knows what the future holds. One of my great principles is about cash flow. Too few property investors – especially beginner investors – look to the future and what might go wrong. Instead, they look at the financials now, today, and base their investment decision on this.

If something changes, and if you haven’t been conservative in your cash flow projections, then you could find yourself in trouble. Interest rates might rise, you could suffer unexpected void periods, a tenant may miss a rental payment, or the property could need unavoidable repairs. Numerous things could happen that affect cash flow.

Use our two-year cash flow worksheet to ensure that all the bases are covered.

Working with the right people

I’m a pretty resourceful guy, but I know that there are things that others do better than me. Sometimes I learn from these people, but usually, I employ them as my allies. For example, I’ve got an incredible mechanic that services my car. I trust him, he does a great job, and never overcharges me. In return, I’m happy to refer him to others.

Whatever your experience as a property investor, you’ll need similar allies.

Step 9: Find a great mortgage broker

A mortgage broker with specific buy-to-let mortgage experience will prove invaluable. They’ll know the market inside out, know all the latest deals, and understand what boxes you need to tick to get a mortgage application approved.

Step 10: Find a good solicitor

In my experience, legal advice is where paying peanuts really do buy a monkey. It doesn’t mean to say that you need to pay over the top, but you do need to ensure that your solicitor knows the property investment market. Exactness and timing are imperative (especially if you are investing in off-plan property opportunities). Getting the right solicitor on board is crucial to successful property investment.

Step 11: Education is a continuous need

If there is one thing that I’ve learned during my more than two decades as a property investor, it’s that investment education never ends. Market conditions change, governments update property taxes and laws, and regulatory bodies change rules. It is why I put so much emphasis on property investment education as a continual service. You never stop learning: partner with someone who understands this.

Contact one of our team on +44 (0)207 923 6100 to discuss your investment objectives and how property investment could help you achieve them.

Live with passion

Brett Alegre-Wood

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