Although it may rise and fall in the short term, one thing we can be fairly certain of is that commercial and residential property prices will rise in the long run.
The fact that property prices have increased by 1010% since 1980, 24 times the rate of annual salary growth over the same period, is proof of this. For this reason, long term investment in property is fairly certain to net capital growth.
To help you launch your property investment portfolio we have put together some top tips below.
1. Prepare a budget
Like all investments, investing in real estate comes with risk. Tenants that do not pay rent on time (or at all), cause property damage, floods, fire… and many other events that can affect your ability to make a return on your investment.
It is imperative, therefore, to make sure that you can cover the mortgage payments out of your own funds as well as pay for any repairs. Furthermore, it is crucial to have the right property insurance cover.
2. Learn to understand property ‘yields’
The ‘yield’ is the annual return you are likely to make on your investment property. A rental yield is calculated by taking the annual rental income and dividing it by the value of the property and then multiplying this figure by 100.
This will give you a gross yield percentage. The net yield percentage is calculated by subtracting the property’s yearly operational costs from its annual rent and then dividing this by the property value.
A good investment yield is generally considered to be at or over six or seven percent. Anything under that may result in you not having enough cash to cover unpaid rent, repairs, or unexpected costs (although if you follow the advice regarding budgeting above, you should be able to pay for these out of your own funds).
3. Partner with an experienced property law solicitor
If you are building a property investment portfolio accessing quality legal advice is essential. Your property solicitor will advise you on everything from acquiring and disposing of properties to drafting tenancy agreements and dealing with problem tenants.
Building a relationship with a solicitor from the beginning of your property investment journey will ensure you have someone to guide and support you through every stage of a property transaction and tenancy.
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