New To Property Investing? Here’s 3 Tips To Help You Purchase The Right Investment Property

The world of property investment can be extremely rewarding, so if you’re in a position where you have capital available to begin investing, but aren’t sure where to start, you’re in the right place. We’re here to talk you through the different considerations when purchasing a property, to help you to maximise your return on investment, from establishing your budget initially through to considering your property options, the benefits of working with a property investment agency and the purchasing process itself. 

The first step of any good investment is to buy the property, and this is absolutely crucial to the ongoing success investment. If you don’t get this right, you’re setting yourself up for failure, so take your time with this and do your research. 

Establish Your Budget 

The first thing you need to do is to establish your budget. You need to know exactly how much money you have for the initial investment, the legal fees and the refurbishments combined, to help you reduce down the properties you’re looking at and to find something that is affordable for you. If you start by looking at legal fees, typically these will sit at around £1,500, then the average cost of a renovation can sit anywhere between £10,000 and £100,000 depending on the size of the property and how much needs doing (e.g. structural or cosmetic). It’s also better to overestimate renovation costs, as there are often hidden issues that arise and unexpected costs you need to be able to cover. 

Then, you need to think about your deposit, which will be 20-25% of the value of the property. You will also need to calculate your stamp duty, which will typically be the standard stamp duty charge, with an additional 5% if this isn’t the first property you’ve purchased, and another 2% if you’re an overseas buyer. 

Sitting down to work this out first is key to understanding the kinds of properties you should be looking at. 

Consider Your Property Options 

Once you know how much you have in terms of a deposit and renovation costs, you need to consider your property options. You want to make sure you’re making money on the project, and so you will need to add value to the property, which typically means investing in a property that needs some work. For most people, this will involve a cosmetic renovation and some more major elements, like a new kitchen or bathroom, or slight restructuring of the layout, such as knocking down a wall to make an open plan kitchen and dining area. Most investors following a BRRR strategy want to avoid major structural work, as this is where the costs really ramp up, and you won’t notice much of a difference in terms of the value of the home. So, looking for properties within your budget that need work doing, but aren’t major projects, is usually a good middle ground. 

In terms of your property search, you also need to think about the location, as if you’re purchasing a property in an already established and very popular area, it can be more difficult to make money over a longer period of time, which is typically the goal with BRRR. So, finding a location that is up and coming, with good amenities and public transport links, is usually a good route to help you make money over the course of your investment, as well as increasing value shorter term. 

Identify Areas To Increase Value 

One of the most important things you need to do when looking for an investment property, alongside choosing the right location, is to identify areas within the property that can be renovated to help increase the value. Resolving structural problems costs a lot and doesn’t add much value to the property, so try to avoid these. 

The areas that can really add value to a property, along with increasing your potential monthly rental property yield quite significantly, are improving the kitchen and bathrooms, adding an extension for another room, making spaces more open plan, improving energy efficiency and generally creating a property that is bright and airy. Modern functionalities are also important, including things like efficient appliances. For houses, curb appeal is key, so focusing on a well maintained exterior and a lovely garden are key. Depending on how much you have to invest, you may consider working with English architects to transform the property. 

Creating a blank canvas is a great start, particularly if you’re renting out a property so tenants can make it their own. 

Work With A Property Investment Agency 

One of the best things you can do is look for BMV properties, with the help of a property investment agency like CityRise. BMV stands for below market value, and refers to properties that are being sold below what the average price is for a similar property. This can be for a number of reasons, from market fluctuations to the owner needing to release cash quickly, or the condition of the property. 

A property investment agency will help to identify the properties that have the potential to increase in value significantly, without hidden structural issues, to maximise your investment. They can guide you through the process to make sure your investment is profitable and to mitigate risk of hidden costs wherever possible.  

Whilst working with a property investment agency does require a fee, more often than not your return on that investment is astronomical over the course of owning and renting out an investment property, as it will be much more profitable than if you were to source the property yourself as a beginner without the years of knowledge they will utilise. 

 

Final Thoughts

There are so many things to consider when investing in property and finding the right option to suit your investment goals. Having a clear budget is so important to help you narrow down your investment options, then you can find the right property. From here, invest your money in the right way in terms of refurbishments to maximise your return. 

One of the best things you can do is work with a property investment agency to utilise their expertise and they can take the stress away from it, to help you find a property you know will be profitable for you and aligns with your investment goals. Choosing the right property is so essential in setting you up for a successful investment, so take your time with this and go with your gut feeling, as if something doesn’t feel quite right, then it’s likely not the one for you.