Buying residential property is one of the most common types of investments people make. It comes in a number of forms, ranging from buy-to-let through to property fund investment. This article will give you some insight into what’s involved in residential property investment, what forms it can take, and what risks you need to be aware of.
What are the reason for investing in residential property?
There are two primary ways to make a potential return when investing in a property:
– Rent – you can gain an income by letting out your property to a tenant/tenants.
– Selling at a profit – this can involve developing a property or committing to a long-term housing investment, but it means purchasing a property and selling it later at a higher price.
Choosing a residential property over a commercial one is a simpler and more secure investment. You won’t have to run a business out of it yourself, and the rent you get from your tenant won’t be dependent on the success of the business that would be running from your commercial property. Residential property investment also gives you greater control over when to sell the property, and there is less risk of damage involved when it comes to residential tenants, as opposed to a commercial tenant.
Before making the choice to invest in residential property
Before making any big decision about investing in residential property, you should try to learn as much as you can. A look at the right residential investment opportunities will give you a strong idea of what is available to you. If you want a reliable source of the pros and cons, you can do your own detailed research or even seek professional advice on the matter.
Property investment is a big decision, so you never want to take it lightly. Educate yourself about everything that it involves, and take a good look at which type of investment will be best suited to your goals. Buy-to-let investment involves a complex set of things to do before you start seeing your profits while aiming to sell at profit doesn’t come with a guarantee that you’ll actually achieve that profit.
How to enter into residential property investment
To buy a property, you need capital. If you’re lucky enough to have enough capital to buy a property directly, there are certain risk factors involved. Otherwise, you’ll be buying with the help of a mortgage or loan, which comes with its own elements of risk. Property investment is a shrewd and lucrative decision, but only if you are fully aware of all the factors involved.
The risks of buying directly as an investment include:
1. Your money is tied up in an asset – it can take a long time to actually sell a property, so you may have to wait to see the returns on your investment.
2. It’s a large commitment – you’re putting a lot of eggs in one basket, and although the property market usually pays off, there are no guarantees.
3. Buying/selling costs – there are many fees involved in both buying and selling a property, so be sure these are all factored into your plans.
4. It’s demanding – maintenance work and property management requires time and money. And look out for leasehold arrangements that might need extending.
With a mortgage, the things to consider include:
1. You can’t guarantee the rent you receive will cover loan repayments fully.
2. The cost of your mortgage might increase.
3. failure to keep up with payments could lead to the property being reclaimed by your mortgage broker.
Investing in commercial property comes with its own set of risks and headaches. You may struggle to find a tenant if the location isn’t good, and there is lots of additional paperwork involved that constitutes a lot of extra work that just doesn’t happen when you invest in residential property.
There are many residential investment opportunities that could make you a fantastic profit if handled in the right way. The most important thing in your decision making is that you have a comprehensive knowledge of everything that’s involved. Be aware of your goals, your budget and your needs. Be aware of all the fees associated with buying, selling and letting a property, and any other legislation that will impact your investment. Don’t take big risks when investing in property; have all your bases covered, and it could just be the best decision you ever make.
