Five Key Tips For Investors Starting Out In Property

Hello readers,

I’m excited to have seen a significant increase in the number of regular attendees to The Property Success Network that I host with Steve Maher following our recent move to the Holiday Inn at Chatham.

If you would like to find out more, you can head over to https://propertysuccess.network/ for full details and if it’s your first time, you can claim a free ticket by replying to this email and I will let you know the promo code.

Something that I regularly talk about with investors both at our networking event and on a day-to-day basis is how to get started in property.

I think we will all agree that long gone are the days when you can purchase a property and benefit from low mortgage interest, with significant appreciation in a handful of months. There can, however, still be a misconception that investing in property is a sure-fire way to ‘get rich quick’ and this is certainly not the case.

Investing in property can challenging, fraught with potential pitfalls and generally requires a significant chunk of seed capital. Don’t let this put you off though as investing in property can also be rewarding and an excellent way to generate inflation-beating returns (if you’re prepared to put the effort in).

If you’re thinking about getting started out in property here are a few tips that will help get you on the right path:

1. Invest only when it makes financial sense

When I mean by this is making sure you only invest when it is wise for you to do so. Never put yourself in a compromised situation through your choice to invest and it’s crucial to have a firm grasp of your financial status before making any decisions regarding a property.

This includes considering any outstanding debts or significant expenses that you expect may be coming up, as well as determining the amount of savings you wish to maintain for unforeseeable emergencies.

Once you have reviewed your financial situation, you will want to make sure to have calculates all of the expenses associated with the property and have a clear understanding of the potential returns on your investment.

Only then should you be confident to make that investment decision.

2. Have a good understanding of taxes and fees

This starts with having a good accountant and solid financial advice. Here are a few key areas you will need to have a good grasp of:

Stamp Duty

Remember that second properties attract an additional rate of stamp duty. If your buy to let is your only property it is likely to attract a lower rate. Current stamp duty rates for second homes are as per the below:

Income / Corporation Tax

Remember that rental income or income from appreciation is subject to income or corporation tax. This can be a complex area that depends on whether your property is owned in a personal name or within a limited company.

Depending on your long term strategy you may benefit from owning the property in a personal name rather than a limited company and you will always want to get solid financial advice on this before making any offers.

Capital Gains Tax

If you choose to sell your property you own as an individual later down the line, you will be responsible for paying capital gains tax on any profit made from the increase in its value.

The amount you owe will depend on the amount of profit earned, and you must factor in the costs associated with buying and selling the property, such as legal fees, when calculating the tax owed.

It's important to note that if you sell properties that are held held within a limited company rather than owned as an individual, you would be subject to corporation tax rather than capital gains tax.

3. Aim for a robust rental yield

Make sure to evaluate the potential rental yield of a property before making any investment decisions. Yield is different to ROI and you can read how to calculate both in my article here.

HMOs tend to have a better yield than single let properties and a high rental yield can cover the mortgage repayments, taxes, and fees associated with the property, making it self-sustaining.

A rental yield of around 5% is where you will want to aim for a single let within Medway, but a higher rental yield of 8% or more is even better for generating monthly cash income.

Your yield calculation will help guide how much you pay when purchasing and renovating your buy to let property as well as enabling you to compare deals.

4. All about compliance

The requirements on landlords when it comes to compliance has developed significantly over the past decade.

Landlords now need to have the right paperwork in place, checks and more including making sure their property meets required standard.

If you have any questions about compliance, you can access a comprehensive guide that I wrote here.

Not meeting the right requirements can leave investors with big issues later down the line, so it’s crucial to get things right.

5. Great things come from small beginnings

Starting small is probably one of the best property tips I can give first-time investors. Honestly, this is so important!

In Medway you will want a budget from around ￡70k (which is still not an inconsequential sum). It's crucial to focus on properties that fit within your budget and have the potential to generate returns, but also keep in mind that you'll need at least 25% of the property price as a deposit.

If your long-term goal is to build a property portfolio, it's wise to invest steadily in one or two properties initially. This will help you become more knowledgeable and confident as you gain experience.

Just remember that property is a long-term game and can take years (if not, decades) to reveal its full potential.

If you would like to find out more about how to invest in property feel free to join us at our next Property Success Network event, or book a two hour, in depth discovery session with me at a time that suits you through here.

My last tip is to enjoy the journey!

Hasan