Investing in property has been happening for years and everyone has different opinions as to whether it is a good idea or not and the pros and cons of putting your money in property.
If you’re deciding whether to start building up investments through buying property, you might want to read our breakdown of the pros and cons and everything else you need to know.
According to the Money Advice Service, property investment is one of the four most common types of investment, so how does it actually work?
If you’ve got an initial amount of money to spare and you’re wanting to make a return on it, then there are two key ways you can use property to make a profit:
‘Buy-to-Rent’ – if you’re wanting to make a slower but more long-term profit off buying a property as an investment, buying to rent is the best option.
This option works by buying a property off the market and then renting it out to a tenant, you won’t make money immediately, but over time and as you pay off your costs for buying the property you’ll begin to make money off the rent.
‘Buy-to-Sell’ – if you’re wanting to make money quicker off property, you may want to invest your money in buying a property and then selling it on again for more than you paid.
This option breaks down into another two choices:
- Buying a new, well-kept property and attempting to sell it for more
- Buying a run-down property, renovating and redecorating and then selling.
There are many things you need to consider before you go into investing in property, as it isn’t a short-term hobby and you want to know exactly what you’re getting into before you begin.
It isn’t a Quick Payout
Unlike other forms of investment, property takes a long time to start producing the profit you’re aiming for, whichever way you go about it.
If you choose to rent out, you’ll have to wait for your costs to be covered before you make anything back, and with selling, unless you sell for cash with people like Quick Buyers, house sales aren’t quick and waiting for the right buyer who’s going to offer you the price you’ve got your mind set on is going to take time.
From start to finish, the process of investing in property and making money from it is long and involves a lot of dedication. From finding and viewing properties that you might want to buy to then following through all the next steps of whichever route you go down you’re going to have to have a lot of free time to make it work.
Buying a property as an investment still works the same as buying a house to live in, there are a lot of additional costs on top of the price you’re paying for the property.
You have to include legal fees, surveyor fees, stamp duty, as well as additional taxes for purchasing this property as a ‘second home’ even though you’re not living in it!
You Might Never Make the Money Back
However you decide to go about it, you might never make your money back. There’s no guarantee in property investment that you’ll make a profit. At the end of everything you could end up even with where you started, or sometimes worse off, so it is important to consider whether you can afford that risk.
Although property investment comes with its risks, there are a multitude of benefits that come with being successful with it.
If you ‘hit the jackpot’ when it comes to finding the perfect property and making the money back, then you’ll be about to witness the benefits:
Being a landlord, for example, leaves you with ultimate control over the property. Although being a landlord entails a lot of care and responsibility for the property and tenants you can ultimately dictate how the property is treated in order to secure or improve its value over time.
Once the graft of finding and sorting the property is over and any payments you needed to make are sorted, your money should come to you quite easily. In the grand scheme of things property sale is quite simple, if you follow the processes and do them properly you should start to make your money back without too much hassle.
An Investment for the Future
A successful investment in property that continues to pay out well is a great value investment to leave to your family for the future.
One of the benefits of buy-to-rent especially is that as long as you’ve got a tenant you’ll continue to get money and once all your costs are covered the money you get is a profit. You can leave that property to another person in your will should anything happen to you, you must leave detailed guidelines as to how you want the investment/property to be used in the future so that someone can’t just sell it against your wishes.
That is our breakdown of all the truths behind property investment. We hope this has been informative if you’re looking to use property as an investment, we wish you luck!