Asking whether the moment is right to invest in a property purchase is not a question that can be answered quickly or easily. There are many facets to be considered before such a large and financially committed decision can be made.
First of all, what is the state of the property market? At present prices are not bad and real estate experts expect prices to peak slightly in 2012 before reducing – except for London, which it expected to remain strong as it has a healthy property market due to the immense desirability of property in the city. If you have your heart set on owning property in a particular area, pop into local estate agents, search online registries and newspapers to find out the type of area it is and property values and their trends over the past ten years. This can give you useful information and perhaps even persuade you to try a nearby area that just may have extra desirability. If you simply want to invest and have no particular enthusiasm for any particular area, again a little research can put you into the heart of your target market.
The second thing to consider is how you are hoping to make a profit from your investment. There are two revenue streams from a property; the first one lies in the ‘Buy to Let’ market, and second is in capital gains, whereby a property is purchased, improved then sold on for considerable more than the purchase price. The first bubble to be burst must be the idea that it is ‘easy’ or ‘quick’ to make money from a property investment. Capital gains are not easily achieved and calculations must be performed to ensure that the financial estimates are all accurate and fully inclusive. Costs that should be considered include mortgage fees, including administration charges, council tax where applicable, utility payments, transport and telephone charges for communications and reaching the property and any third party charges such as solicitor’s fees or estate agents costs. If any of these are forgotten or estimated too low a healthy little profit can quickly turn into a nasty little deficit. A below market value property can seem to be a bargain too good to miss, but do make sure you still check out all the relevant facts and figures – there may well be a reason for the low price!
A marginally better idea is to follow the ‘Buy to Let’ process. If you are not comfortable with dealing with tenants and ensuring that all legal requirements are followed, many estate agencies have leasing sections that would be happy to manage your property – for a fee of course. If you are patient and ensure that the fees charged are not too excessive then is possible to make a profit from owning a property.
If you are determined to manage the property yourself, once again, do your research! It really cannot be emphasised how important it is to have absolutely every possible contingency planned for. Do not skimp on things like insurance; it may seem to be a waste of money better spent elsewhere, but if the unthinkable happens you could find yourself responsible for your tenant’s well-being and accommodation to a ruinous degree.
Is now a good time to invest in the property market? Yes, especially if you can purchase a below market value property and if you are 100% certain that you fully understand your responsibilities and duties as a landlord or developer, and as long as you are going into the investment aware of the constraints and restrictions that will require patience and ongoing commitment before the profit is realised.
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