Property Investment Frequently Asked Questions

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Below are the answers to the most common questions we’ve been asked about property investment

How much money do I need to invest in property?

This obviously depends on the market price for available investment properties you might consider, most lenders require a deposit of 25% of the purchase price but a bigger deposit would normally mean a better interest rate.

What returns can I get by investing in property?

Investment returns vary depending on the type of property and the prevailing market conditions. You may find the monthly yield on some properties are lower but could offer greater capital growth. We are always happy to sit and discuss options with you.

What is the fastest way of getting a return on property investment?

The quickest way of making money from property is actually one of the hardest. It’s buying a property you know is at a discount, then immediately selling on at a profit. Not too difficult in a rising market but requires professional experience in a static/falling market. Other fast ways of making money are from self-build or property development which can be turned around in less than 12 months.

Do ‘no money down deals’ property investment deals work?

They can, but are extremely high risk. You are effectively ‘betting’ that the property market will rise. We have seen in 2008 that doesn’t always work. No money down deals should only be entered into if you are confident in the people that are offering them, they allow you to check their information with your own independent legal and financial advisor. Never enter a ‘no money down’ deal unless you have excess cash to cover losses.

What are the risks investing in property?

The risks are great. Versus other financial investments, property is a medium to high risk investment. The difference between property and other financial investments is if it goes wrong it can go very wrong. Unlike stocks/shares/pensions if your property investment falls in value or you aren’t able to cover the costs of holding your property investment you have to find MORE money to put in, if you don’t you could lose everything and potentially go bankrupt.

What are the benefits of property investment?

The main benefit that investors see is the opportunity to ‘gear’ the investment through borrowing money, so if you have £50,000 to invest and gain a 10% return, you’ll receive £5,000 gross profit. If you invest £50,000 in a property worth £200,000 and it grows by 10%, you’ll get £20,000 back. However, this only works when property prices are rising, you buy at a substantial (real) discount and/or you wait until the property has grown in value.

Can property investment deals help me get rich quick?

It’s unlikely. You can invest in ‘flipping’ property, building property from scratch or renovating property and adding value. This can give you a ‘quick’ profit within a year. However, with the uncertainty around property prices, this increasingly requires professional help which can eat into any profits.

Is investing in property better than investing in the stock market?

This depends on your attitude to investment risk and how much money you have available to invest. You should seek advice from an Independent Financial Advisor to help you identify the answer to this question.

Is investing in property better than investing in a pension?

Property investment as a pension scheme isn’t necessarily the best way to invest your money, mainly because you will lose the tax benefits of investing through a pension scheme which if you are a 40% tax payer can be quite substantial. Check with an Independent Financial Advisor and also with your company pension scheme if you are looking to invest in property versus a pension scheme.

What are the pros of investing in property?

The pros of investing in property is that your choice of what you invest in are typically yours. You can also “touch and feel” your investment, giving you the feeling of more ‘control’. If done well, property investment can deliver some great returns. However, property investment isn’t easy and increasingly requires professional assistance from people/companies that have been investing successfully since the early 1990s.

What are the cons of investing in property?

The downsides of property investment are having to ‘top up’ your investments with cash if they don’t perform and that you are to some extent at the mercy of macro and micro economic conditions. Finally, property investment is complex and not every property, fund, syndicate will deliver. The research required can take weeks and months and the amount of money now required in the UK to invest is in excess of £30k for just one property.

How much does a buy to let cost?

You would normally need a 25% deposit on the property’s value, around £2-3k to make sure the property is legal and fit to let and an on-going investment of £500-£1,000 per year to maintain the property/let. You also need to consider your buying/selling costs, which range from 2-3% to 8-9%.

What return will I get from buy to let?

Buy to let gives two types of return typically over a 10-15-year period. Income from rent which can be 4-12% of your investment and growth from capital which is purely an estimate from historic price information of around 5% per annum OVER A TEN+ YEAR PERIOD.

Where can I find property at Below Market Value (BMV)?

Buying below market value (BMV) is a ‘buzz word’ that has come from property investment companies. There is often much ‘mystery’ applied to how to buy at BMV and you can pay thousands of pounds for the ‘secret ways of accessing’ properties at BMV. The truth is it isn’t easy and you have to put lots of time aside, make lots of offers, most of which will get rejected! The key to buying properties at below market value is to understand local property prices well enough that you almost instantly know when a property is for sale at below market value.

How much should I be buying a property Below Market Value?

In a recession you would look to be buying property at least 15% below their true market value at the time of purchase to avoid problems from future price falls and ideally 20% or more. However, to buy at this level of discount you would need to be comfortable with buying off people who are about to be repossessed or are in severe financial difficulties.

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