If you are considering investing in property for profit, be it commercial property, residential buy to let property, land for redevelopment or even indirectly through a Real Estate Investment Trust (REIT) then having a well-defined property investment strategy with clear goals and objectives will be essential to your success. As an investor your property investment strategy is likely to be dictated by your personal circumstances and your ultimate investment goals and objectives.
In developing your investment strategy there are many factors for you to consider, you may have a capital sum to invest which has been left to you, you may have an amount of money available for investment due to redundancy or retirement, you may be more interested in investing for income as opposed to capital growth… these factors and more all need to be incorporated in to your property investment strategy to make it work for you.
Property Investment Strategy
You will need to decide if you want a quick return on your investment or you may be looking to buy a property as a home for yourself, and to gain a profit from it by selling it after a few years of living in it.
If you invest in your home in this way it can be particularly tax efficient as you are generally not liable for capital gains tax on any of the profits you make from the sale of your home.
However, you should always check with the tax authorities or a specialist tax adviser first.
You may wish to buy a dilapidated property in and up-and-coming area, with the intention of renovating it quickly to sell at a profit.
You may also wish to consider investing in commercial property, overseas property, investment land or even indirectly through a Real Estate Investment Trust (REIT) – there are lots of options for investment in property for you to consider.
Investing in Buy to let Property
You may decide to invest in residential property to let out to tenants, this is usually called buy to let property.
This form of buy to let property investment is particularly popular in areas where there is good tenant demand such as close to a hospital or in a University town where there is a large population of students.
Renovating a property to make it suitable for letting is usually necessary with most properties, however if you’ve budgeted correctly the rents received will help cover the mortgage payments which were used to buy the property, the refurbishment costs and the maintenance costs.
Hopefully your buy to let property can then be sold at a later date for a profit.
Investing in Student Property
Many parents of students have entered the property investment market in this way.
Parents of students buy a property for their offspring and let part of it out to other students, defraying their costs, and making a capital gain when the property is eventually sold.
Investing in Holiday Homes
You may decide that you would like to invest in a holiday home in an area where you would like to spend some time, this could either be in the UK or in an overseas location you enjoy.
Your holiday home can be rented out when you are not using it to defray the expenses you incur from loans, taxes, maintenance and management costs, and can be sold at a later date in the hope of making a profit.
Alternative Property Investments
There are many other property investment avenues to explore, such as buying new-build, off plan property, buying a small hotel or a bed and breakfast property; or even buying commercial property.
Indirect Property Investment
Indirect property investment describes the purchase of stocks, shares, bonds etc. in property companies, investment trusts and pension funds, usually those listed on a regulated exchange such as the London Stock Exchange.
Investing in Real Estate Investment Trusts (REITs) can present good opportunities to gain access to prime real estate assets, different classes of property… they can also offer tax advantages that are well worth exploring further.
Developing your Personal Property Investment Strategy
Before you begin invest you need to develop your personal property investment strategy… the recommended starting point for any aspiring property investor is to considering the amount of money you have to invest and the returns you expect to gain.
You should also consider your own aspirations as a property investor i.e. do you want to work on the property and increase its value, or simply sit back and wait for property to gain in value?
Do you want to administer and manage the property yourself or leave it in the hands of a property agent who will look after any lettings, tenant verifications and property maintenance?
It is recommended that before you adopt any particular property investment strategy, you research each option thoroughly so that you know what the legal implications, tax situation, time commitments and expenses involved are.
Setting your Investment Goals
Investing in property is an investment which should be seen as one in competition with other investments such as equities, fine art, stamps, antiques, wine, classic cars, and others.
Investing in property or for that matter any other form of investment vehicle is not the same as saving, where you put your money into a savings account in a bank or building society… investing has its risks and you need to understand what they are.
In placing your money in to a bank or building society your money is almost totally safe, but the returns are usually relatively poor.
Investing is on the other hand not risk free, although the returns that can be achieved are often higher… this is usually linked to the level of risk which can be higher.
What about Investment Returns on Property?
Property investment has the potential to deliver much higher returns than savings, but can also create losses, and so introduces an element of investor risk that needs to be carefully understood and managed.
Property investment has historically provided good returns, but a falling market can create losses, especially in the short term.
Over the long term however, property does increase in value, as there is a shortage of property and it is something that never goes out of fashion.
It is a fact that many of the richest people in the Western World made their money in property.
The Key to Successful Property Investment
One of the key factors to a successful property investment strategy is knowledge.
Knowledge of the market, of the cost and availability of finance, of the region where the property is located, of repair and renovation costs, of local property laws, and knowledge of legal costs and the laws of taxation all combine to give you a solid foundation upon which you can invest.
Before you leap in and make your first property acquisition always carefully research your market.
It is an essential part of your property investment strategy and will ensure any investment decisions you make in the future are founded on a thorough understanding of the market and on well researched facts.
Property Investment Solutions
As a leading independent property and land investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.
If you are a property investor searching for commercial property, residential buy to let or overseas property investment opportunities please contact us today to discuss how Investment Property Partners can help you.
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