How to buy property as an Investment
Do you buy property with a focus on increasing capital value over time, or increasing cash flow on a monthly basis? We work with investors every day, and as a Maslow Client, we will give you the best advice on purchasing property to let as an investment strategy;
Heres a few decisions you need to make before going forward and purchasing your first “buy to let" property:
What type of gains are you trying to achieve? Are you looking for Long-term capital growth? Or are you looking at generating a positive cash flow on a monthly Basis?
Buy to let Capital Growth Strategy
The capital growth strategy involves purchasing property, with the expectancy for the property capital value (sales price) to increase over time. This is a long-term property investment strategy, great for investors who are looking to secure their funds to ensure growth over the inflation rate. Heres some tips on how to invest for high capital growth:
Research your area to see what the increase in property prices have been over the last 5 years. Areas with higher constant increasing property values are more likely to continue increasing at the same rate. Choose areas with high increasing rates. Stay away from high-density areas, these areas are more likely to have reached their capital peaks, and experience lower year on year increases.
-Buy near Amenities
Properties near popular amenities like schools and malls are always hot sellers and have proved to be the best capital growth receivers. Buying in areas where density is not high means that when the areas eventually do develop into higher density zones, the properties close to the amenities will shoot up in value.
Buy to let Cashflow Strategy
The cashflow strategy involves purchasing property to gain a monthly cash flow. This concept involves bonding a property or purchasing cash, with the purpose of generating a positive cash flow on a monthly basis. The concept is simple, make more money than you spend. Heres a few tips when purchasing property and maximizing monthly cash flow.
Put down as large of a deposit as possible
The Larger your deposit, the less your monthly repayment, with cash flow in mind, you want to consider a deposit large enough to ensure your positive cash flow after other expenses. If you are purchasing your property cash.. well, you need not read the rest of this post.
Make sure you are aware of all the costs before you purchase
Levies, property tax, maintenance allowance, insurance, estate agency management fees, bond amounts, are all costs you need to consider. Do not underestimate your maintenance allowance. If you need to fix something, in a rental property, best do it to keep within your legal capacity as a landlord. Don’t attempt to manage the property yourself if you are not familiar with all the laws that are involved with letting your property. We see many landlords do down the same route- straight to the auction house with distressed sales from tenants who decided to squat.
Make sure you know your market value before you buy
What price can you let your property for? Use an experienced letting agent to give you the figures. If you are serious, you must have these figure from 3-5 different letting agents before you purchase a property. You need to have your figures before you sign any offers.
Make sure you can budget to use an estate agent
Investments can turn into your worst nightmare if you don’t know what you're doing. Pay an estate agent to manage your property, so you can focus on expanding your portfolio.