If you are keen to increase the balance of your savings account, you want to expand your investment portfolio, or you want to prepare for your twilight years, the chances are that you have looked into the world of property already. Many amateur investors are choosing to withdraw some of their cash to pump into bricks and mortar assets. The housing market is seen as a stalwart of resilience when it comes to making money. While the risk may be low, the property market is entering unchartered waters. The global pandemic has hit the economic markets that have become more volatile than ever before. So, does this mean you should steer clear of property?
Property, while it may be less lucrative than it once was, is still an avenue down which you can pump your hard-earned cash as a creative side hustle. As part of a varied investment portfolio, property gives you the opportunity to earn a fast buck or be in it for the financial long haul. This means that you can either flip a property to sell or you can purchase a pad to rent out over a number of years. You need to do your research and work out what your financial goals are. Welcome to the wonderful world of property development.
Your Finances
It isn’t possible to buy a second property if your financial ducks aren’t all in a row. You need to ensure that you have the acumen and ability to pay back any second mortgage or loan as you renovate a pad, make it fit for sale, or get it ready for letting. Think about how you can make it clear to any home loan lender that you are a responsible borrower. Ensure that you stay in the black and don’t venture into your overdraft for at least six months prior to purchasing a new pad. Think about paying off your credit cards or managing any debt that you do have effectively. You need to prove that you have the affordability capability to repay any home loan that you take out.
Second home loans need investigation. You may be liable for more fees on the initial purchase price and the mortgage interest may be higher than what you are used to paying for your own pad. Do your research and shop around. You could choose to employ the services of a specialist broker to help you secure a home loan that has the most favorable rates.
When you have worked out the amount you can spend on a second property, you need to ensure that any further renovations that you need to carry out to get the home up to standard does not exceed the potential resale value of the dwelling. Remember, this is a financial investment that requires you to think with your head rather than your heart. It’s all too easy to buy a pad for a great price but then carry out a scheme of works that is highly personal and way too expensive for the locality it is within.
Buying The Property
If you are keen to buy a second property, the chances are that you will explore the world of property auctions. These fast paced environments are perfect places to pick up a bricks and mortar bargain. Don’t head there with property buying in mind in the first instance. Initially, you should attend a property auction just to get a feel for the room. How does the auctioneer take bids? How quickly do the bids ramp up? And do the properties sell for much over the guide price? It’s all too easy to go over your maximum bid when you hit the property auction. However, doing this could see you lose any chance of making a profit. You need to think about your investment and maximizing every opportunity you have for making money.
If the auction seems too pressurized for you, think about other ways to make money from property. You might want to do a one eighty and focus on a different demographic altogether. Buying luxury real estate can be a lucrative way of making money if you have the initial funds to make the expensive purchase. These incredible luxury pads are great assets to hold on to long term. You might want to buy a larger home in a salubrious area to rent out to wealthy families and rich professionals. They will pay the rent on time and will look after the property. This rent should cover your home loan repayments every month meaning that your asset pays for itself. When you are happy with the increase in the sales price that you can achieve, you can then sell up and move on with your money.
Auction houses are a super way to purchase that fixer upper – the sort of home at the other end of the spectrum. Think about staying within your budget and not overstretching yourself in the first instance. You could choose to buy in an up and coming area, but be wary that this isn’t just a euphemism for an undesirable region. You need to be buying in an area that has sound transport links, great schools, and low crime rates. This will ensure that people will always want to rent or buy your home.
Do The Sums
Buying a pad at auction does not guarantee a profit no matter how easy it seems on the property shows on TV. You need to consider your finances very carefully. Consider the amount you have to purchase a pad and the money you have in reserve to do some renovations. When buying at auction, it is always a good rule to buy the worst house on the best street. Doing this will allow you to try and stretch the ceiling price of a road while knowing that the dwelling you have purchased is in a great area.
You need to budget every job that needs completing in the pad that you have bought. This means going old school and venturing into every room with a clipboard and listing the large jobs like replacing a roof as well as the smallest and cheapest jobs such as replacing the hinges on doors. This will enable a clear budget to emerge. Make sure that you add a ten per cent contingency as unforeseen jobs and tasks will always arise, especially if the humble abode that you have has been uninhabited for a decade or more.
Bringing a dwelling into the twenty first century can be costly. While you can instruct a team of tradespeople to complete the jobs such as the plastering, the decorating, the kitchen fitting, and the laminate flooring laying, it can be cheaper to do some of these jobs yourself. While you might not be very adept at DIY, the tutorials and step by step guides for novices on YouTube can be beneficial to help you save money. Every cent your save on renovations is an extra cent on your profit margin. This soon adds up if you are able to do all of the painting yourself within your pad.
Consider the timeframe, the fees, the mortgage repayments, and the tradespeople you do need to ensure that you don’t go over the potential sales price that you could achieve This will result in your property tr=urning into a money pit. You need to think about the renovations that you choose to implement. While you may adore the granite quartz kitchen worktops, this would be wholly unsuitable in a starter home for young couples. This would only be a worthwhile renovation consideration in a high end penthouse or home for wealthier families.
Think about achieving a high quality finish for as little financial outlay as possible This does not mean scrimping. You will still need to pay for the larger jobs that need doing. If you have damp in your pad, don’t just paint over it and do a cowboy job. This will be picked up on a survey and will result in you selling for a lower price. Get a specialist involved and sort it out quickly. The same goes for any structural defects, roofing issues, and pipework concerns.
Selling Or Renting
Depending on your financial goals, you might choose to flip a pad quickly or rent over the long term. Flipping is more tricky when the economic markets are more stagnant, although it is not impossible. You will need to cut costs as much as possible and think about creating a neutral palette so your potential buyers can stamp their own mark on the place. When considering renting, you must make sure that you can achieve a rent that covers your home loan repayment at the bare minimum. Any extra that you can achieve a month can go into your savings. As a landlord, you will be responsible for the building, so ensure that you have the time to commit to the leaking roof or the dodgy plug socket should it occur. If you don’t like the thought of being so hands-on, consider a lettings management company that can take on the role of landlord for you for a small fee.
Venturing into the world of property may be daunting, especially during a global pandemic, but you can achieve your financial goals through bricks and mortar. Go to the auction, do your sums, and enjoy seeing your money grow within your asset rather than languishing in your bank account.
