The benefits of property ownership extend beyond simply providing shelter, it is can also be a stepping stone to financial security and wealth creation.
This is according to High Street Auctions Director Greg Dart. Dart ntoed it can be risky for novice investors who dive straight into the deep end.
“The advice I always give to first-time buyers is that knowledge is power. The real estate industry is complex, so you need to understand and plan before you act – not the other way round,” Dart said.
Here are seven things you need to factor into your property investment strategy:
Define your goals
Before delving into property investment, it's essential to identify your investment goals. You can achieve this by asking yourself key questions such as: Am I seeking steady rental income to supplement my salary? Am I aiming for long-term capital appreciation through property value growth?
“Understanding your objectives will steer your property selection and investment strategy,” Dart said.
Be numbers-savvy
You need to think further down the line than the initial cost of buying a property.
It's crucial to consider ongoing expenses such as rates and taxes, insurance, maintenance costs, and, for landlords, potential vacancy periods.
If you plan to develop a property, strategise the most effective cost approach in advanc, This includes assessing your equity stake, the availability and terms of senior debt to fund the project, and determining whether mezzanine financing is required.
Rome was not built in a day and according to Dart, real estate is a marathon, not a sprint.
While short-term gains are often possible, the best way that people should view property investment is as a long-term wealth-building strategy.
“There will always be fluctuations in the market, but in the long run, property investments tend to offer significant returns,” Dart said.
Build a solid financial foundation
Dart said that you need money to make money in real estate, which starts with a solid financial footing.
“If you need to borrow to buy your way onto the property ladder, a healthy deposit reduces your loan-to-value ratio. This makes you more attractive to lenders, which you can potentially leverage to negotiate a lower interest rate,” Dart said.
People should focus on improving their credit scores and save diligently – even if it means beans on toast for weeks on end.
Never buy at the upper limit of what you can afford. Ambition is admirable, but rising interest rate cycles can sink overstretched bond-holders.
Research your market
Study your local property market to understand the current trends, property values, rental yields and vacancy rates.
Look at more than one area and consider factors such as proximity to amenities, infrastructure, and tenant demographics.
Learn from the professionals
Don't do this process alone. Attend property auctions to learn the process and actual market value propositions, then approach reputable brokers or other specialists who know your target market.
Dart said that their expertise can help potential property investors with everything from identifying properties that offer the greatest investment potential to navigating the complexities of the purchasing process.
You should also seek the advice of an experienced financial advisor to ensure your investments align with your overall financial goals.
Define investment strategies
Rental property: This strategy generates passive income through monthly rent. Whether the investment is commercial, industrial or residential, careful tenant selection and property management are essential for success.
Flipping: This is the buying of fixer-uppers, renovating to increase its value, and then selling it for a profit. While it can be lucrative, flipping is a high-risk strategy for real estate novices.
To flip you need market experience, expert project costing, construction and design knowledge, and market timing skills.
Multi-purposing: Versatile properties that can be repurposed to align with changing market trends are good value propositions that lower your risk exposure – especially during economic downturns.
Flexible properties include warehouses that can accommodate one tenant or 10, studio apartment blocks suitable for short lets, long-term tenants or student housing, and neighbourhood retail developments where the tenant mix can evolve in tandem with consumer needs.
Dart says it’s crucial for novice investors to remember that real estate success is a long game.
“Building wealth through property rarely happens overnight so be patient, don’t panic when the market fluctuates and be adaptable,” Dart said.
“Every balanced investment portfolio should include real estate. It’s one of the most stable assets available and it offers significantly higher long-term return potential than more volatile investment classes.”
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