How to invest in property
By Sean Woolley from Cloud Nine Spain
I have been investing in property since the age of 23, buying and selling many properties in the UK and in Spain. Over the years, I’ve learnt lots of lessons on how to maximise return and minimize risk and hope you’ll find my tips and tricks useful.
How I got into property investment
I purchased my first property with my partner at the age of 23. We had to borrow the vast majority of the £48Kpurchase price, but it was definitely worth it. We were able to sell it a few years later for £60K – a 25% return.
We followed that up by buying a stone detached house for £100K. It was a lot of money for us then and a real financial stretch, which we could only achieve with a 90% mortgage. But, we sold it 3 years later for £130K and a 30% return on our investment.
Since then, we have bought and sold many properties, both in Spain and in the UK, even during the 2008 global financial recession. We have never lost a penny (or a cent) on any of our property investments. Sometimes, it’s been a case of “right place, right time”, but more often than not, it’s been a case of shrewd purchasing and sensible thinking and I hope that I can give you a few pearls of wisdom to help you to do the same.
How to get started as a property investor
Save up enough to get a deposit together on your first investment property and make sure it’s in an area that you knowreally well, to give you the best chance of success.
Keep costs low and don’t be afraid to get your hands dirty. If a property needs a lick of paint, do it yourself. Shop around for good value furniture to make the space more attractive to tenants. Try to get the best possible mortgage deal from your bank by keeping your repayments as low as possible while you try to build up additional cash reserves from the tenant’s rental income.
Make sure you understand what’s happening in the market to plan your next move. Read the local property press, learn from experts through podcasts and online resources. There may come a time when it’s sensible to exit ownership, or you may choose to build up your cash reserves from the rental income to raise funds to eventually purchase another property.
Location, location, location
The key element to property investment is always LOCATION.
I always think of the worst-case scenario. If I need to get my hands on the value of this property, can I sell it easily? If not, can I rent it out and make my money another way?
If I’ve invested in the middle of nowhere where there is no demand from secondary buyers or tenants, I don’t have an easy escape. I could be stuck with that property for years, with no buyer in sight and very few prospective tenants.
I often see what look like cheap properties but are located in really poor, underdeveloped areas, and for me, these don’t represent VALUE. Cheap, maybe, but that’s not the same thing as value.
Make sure you select your property carefully, with a location in mind.
Try to choose a property that stands out from the crowd
I tend to choose properties on smaller developments so that there is less direct competition when it comes to selling and/or renting.
If I’m buying an apartment, I will also look at the property “mix” of the development. For instance, if a development has 50 units, 40 of which are 2 beds, while there are 5 one beds and 5 three beds, I am far more inclined to go for a one bed or a three-bed. I don’t really want to compete with 40 owners who may also be looking to rent or sell.
I will also look for any quirky features of the property, or a floorplan that makes it unique. Something that makes the property stand out from the crowd.
Think how you can add value
I also look for properties to which I can potentially add value. This is one of my core strengths as a property investor. I am fully aware of just how much added value can be created simply by reforming a bathroom or kitchen, re-decorating a space and installing some lovely furniture. Very often by investing £20K, you can see an uplift of £50K in the value of the property. Don’t be afraid to put in the work and make an investment to make your property look its very best.
Top Tips for buying a property for investment
- Use your head rather than your heart when selecting the property and always consider your target audience for resale or rental. This property is for THEM, not YOU!
- Choose the area and the property type that makes it easiest sell or to generate income from that investment.
- Look at ALL the costs of purchase and ownership and make sure the numbers stack up
- Don’t follow the masses. Try to acquire something slightly unique. It may cost a little more at the outset, but the reason you purchased will still be relevant when you come to re-sell or rent.
- Spend money on property staging. Don’t skimp on this like most investors try to do. It will keep you ahead of your competition.
- Consider your investment strategy at regular intervals. Do you need capital growth or income generation….or both?
- Keep an eye on the mortgage market, especially considering rising interest rates, interest-only and standard repayment mortgage deals.