{"id":9693,"date":"2023-01-24T09:03:54","date_gmt":"2023-01-24T09:03:54","guid":{"rendered":"https:\/\/novellusfinance.com\/?p=9693"},"modified":"2023-06-16T14:57:37","modified_gmt":"2023-06-16T13:57:37","slug":"beginners-investing-in-property","status":"publish","type":"post","link":"https:\/\/novellusfinance.com\/uk\/beginners-investing-in-property\/","title":{"rendered":"Investing in Property for Beginners"},"content":{"rendered":"
Investing in property is a rewarding way to generate a monthly income. If you are looking into starting your journey as a property investor, you probably have many questions. For example, how do beginners get into property? What type of property is best for a beginner? Is it a worthwhile investment choice in today\u2019s economy? In this article, we aim to answer all these questions and more.\u00a0<\/span><\/p>\n We believe property investment is perfect for anyone prepared to do the research and plan and also has the ambition to succeed. Property investment is no longer a venture only for the rich and privileged. So read on to find out how to get started with property investing.\u00a0<\/span><\/p>\n <\/p>\n Property investment means buying a property to make a financial return on that investment. Buying a property to live in is not considered an investment. Although you may benefit financially when you come to sell the property if the value has increased.\u00a0<\/span><\/p>\n Property investors in the UK tend to buy a property that they then let out to tenants to create a monthly income. Other investors choose to buy a property cheaply and then renovate or flip the property and sell it for a profit.\u00a0 All have the same end goal, to make a profit on their initial investment.<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n It\u2019s natural to wonder if property investment is the right venture for you. For many who choose the property investment path, it\u2019s seen as a reliable way to make an income, either as a full-time job or as a passive second income. It is considered low risk compared to asset classes like stocks and shares. This is because there is always a demand for rental properties in the UK. People will always need homes. In 2022, that demand has reached record highs.\u00a0<\/span><\/p>\n During<\/span> Q2 and Q3<\/span><\/a> of this year, the number of viewing requests per rental property increased by 25% from 9 to 14 viewings on average. Many prospective tenants even offer rent over the asking prices to secure a rental. The average rent in the UK now sits at \u00a31,175 PCM which is an increase of over<\/span> 11% in the last 12 months<\/span><\/a> alone. Now is certainly a lucrative time to consider entering the buy-to-let market. Let\u2019s look at some of the key reasons why property investment is so popular.<\/span><\/p>\n <\/p>\n It\u2019s possible to earn a part-time or even full-time income as a property investor, depending on how you manage it. You can choose to buy-to-let one or more properties. Or, you might decide to try your hand at buying a property to renovate and sell. Whatever path you choose, it\u2019s important to run the numbers to ensure you will make a good return on your investment.<\/span><\/p>\n <\/p>\n Investing in property means you can secure leverage, which could be in the form of a loan or a mortgage. Lenders offer more favourable terms against a property. This can open the door to future investment opportunities. Property is considered a secure investment, far less risky than other asset classes such as stocks or shares.<\/span><\/p>\n <\/p>\n Given a choice between stocks, shares or property, where would you feel most comfortable putting your savings? Nothing comes without risk. But if you are looking for an investment that keeps your savings safe, property has one of the best track records. Over the last decade, the<\/span> UK has seen property prices rocket by over 53%<\/a> i<\/span>ncreasing the average house price from \u00a3222,989 to \u00a3341,019. Of course, the market can change. At the time of writing, property is one of the most secure investment classes you can choose to keep your savings safe for the long term.<\/span><\/p>\n <\/p>\n Whether you invest big or small, property is one of the most flexible investment opportunities out there. Whether you choose to project manage your house renovation project or pay someone else to do it, you are in complete control of how you choose to manage your investment.\u00a0<\/span><\/p>\n <\/p>\n If you turn your property investment into a business venture, you can claim back some of the running costs against tax. You can claim against the cost of rental losses,\u00a0 repairs, maintenance, travel and any admin costs associated with the property. Additionally, you can claim for legal fees as well as wear and tear expenditure on any furnished lettings.<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n So now that we\u2019ve covered some of the main benefits of property investing, let’s look at how a newbie can get started.<\/span><\/p>\n <\/p>\n To get started as a property investor, you\u2019ll need to make a plan and define what your end goal is. For example, it could be to make a full-time business out of it or it could be part of your pension plan or to make a passive income on the side. If you plan to make it your full-time business, you will need to create a business plan, including cash forecasts and timescales.\u00a0<\/span><\/p>\n When you are in the planning stage of buying your first buy-to-let property, you\u2019ll need to have your finances in order. For example:<\/span><\/p>\n Managing your finances is key to the success of any property investment. You\u2019ll need to carefully calculate your projected expenses and work out how you will secure your deposit on the property. When working out how much you need to borrow, don\u2019t forget to include the costs of any renovation work to bring the property up to a good standard.\u00a0<\/span><\/p>\n Be clear on how much you can expect to make through either letting the property or through a sale. Of course, a forecast can change over time, but it can help you keep on track and will give you an idea of your projected returns over time.<\/span><\/p>\n It\u2019s also advisable to research as much as you can about property investment. There is a lot of information that can be found online as well as a number of highly regarded books on the subject from property experts. If you can, talk to industry experts or other property investors in your area for advice.<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n There are two basic types of property investment:<\/span><\/p>\n Within these categories there are several variations, which could include:<\/span><\/p>\n <\/p>\n Buy-to-let investors with four or more properties count as portfolio investors under the<\/span> Prudential Regulation Authority<\/span><\/a>. Lenders take into account the total income versus borrowing to ensure the landlord can continue to pay off any finance already secured on the other properties.<\/span><\/p>\n <\/p>\n Even seasoned property investors can become torn when deciding what type of property to invest in. What it all boils down to is what type of investor you want to be and how hands-on you want to be with your property management. Here are some things you might want to consider when deciding what type of property investment is best for you.<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n Deciding on the location of your investment property is one of the most important decisions you will make. You\u2019ll need to research the areas that interest you to understand if you can achieve a good return on your investment. It sounds obvious, but if you are looking at buy-to-let investment opportunities, choose an area where renters want to live or an area that is considered up-and-coming. Higher returns are more likely in areas that are being developed. When looking at an area, you\u2019ll want to consider:<\/span><\/p>\n <\/p>\n Would you prefer to rent to single professionals, families or university students? The answer will help you narrow down the best type of investment property that meets your goals. If you rent the property out for short-term lets like Airbnb, consider well-connected areas popular with tourists. To appeal to professionals and families, consider properties near transport links and schools.\u00a0<\/span><\/p>\n <\/p>\n If you choose an HMO property (Home of multiple occupancies) you\u2019ll likely attract younger tenants between 22-30. If you choose to invest in a three or four-bedroom house, you are more likely to attract a family. Likewise, a city one or two-bedroom apartment is likely to be popular with single or professional couples.\u00a0<\/span><\/p>\n <\/p>\n There is a common myth that property investment is only for the wealthy. Whilst those looking to mortgage property will need a decent deposit, other options are available.\u00a0<\/span><\/p>\n For a buy-to-let mortgage, you\u2019ll usually require a deposit of 25% of the property value. The higher the deposit, the lower the risk and the better the rate available. If you want to save money on your first property investment, look for opportunities to buy property below the market value.\u00a0 Alternatively, consider looking at some of the<\/span> lowest-cost areas<\/span><\/a> in the UK to invest in. The lower the property value, the lower the deposit required to secure finance.\u00a0<\/span><\/p>\n There is also the option to obtain a bridging loan from Novellus. This can be an attractive prospect for those looking to buy and renovate or flip a property in a short time, for example, 12-24 months. Bridging loans usually make up 50-90% of the property value. Depending on your circumstances and exit plan, obtaining a bridging loan with as little as a 10% deposit is possible. Each loan application submitted to Novellus is assessed individually on a case-by-case basis.\u00a0<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n If you decide to invest in property, there are certain rules you will have to adhere to, depending on the investment direction you decide to follow.<\/span><\/p>\n Here is a summary of the criteria for buy-to-let mortgages in the UK:<\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n Lenders have become stricter with their lending criteria, which is making it more difficult to secure a buy-to-let loan or mortgage. Especially in the current economy, where interest rates are rising, and the country looks set to enter a recession.\u00a0<\/span><\/p>\n Reasons you may have been turned down include age, poor credit history, type of property or not enough deposit available. Also, not having adequate income or rent forecast, or not being a current homeowner.<\/span><\/p>\nWHAT IS PROPERTY INVESTMENT, AND WHY SHOULD I INVEST?<\/span><\/h2>\n
WHY INVEST IN PROPERTY?\u00a0<\/span><\/h3>\n
CREATE AN INCOME<\/span><\/h4>\n
LEVERAGE<\/span><\/h4>\n
SAFE SAVINGS<\/span><\/h4>\n
FLEXIBLE BUSINESS MODEL<\/span><\/h4>\n
TAX ADVANTAGES<\/span><\/h4>\n
How do beginners get into property?<\/span><\/h2>\n
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WHAT TYPES OF INVESTMENT PROPERTY ARE AVAILABLE?<\/span><\/h2>\n
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LANDLORD PORTFOLIO\u00a0<\/span><\/h4>\n
WHAT TYPE OF PROPERTY INVESTMENT IS BEST FOR BEGINNERS?<\/span><\/h2>\n
Where do you want to invest?<\/span><\/h4>\n
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Who do you want to rent to?<\/span><\/h4>\n
The type of property<\/span><\/h4>\n
CAN I INVEST IN PROPERTY WITH NO MONEY?<\/span><\/h2>\n
THE LENDING RULES FOR INVESTMENT PROPERTIES<\/span><\/h2>\n
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WHAT IF YOU\u2019RE TURNED DOWN FOR A BUY-TO-LET LOAN OR MORTGAGE?<\/span><\/h2>\n