Some investors might be cautious about putting their money into property because of common misconceptions. We help you extract the more useful information from some misleading perceptions.
You need to have a lot of Money to Invest in Property
This is probably the biggest misconception. While you do need some money in the bank to put down a deposit, the beauty about property is that you are able to use someone’s else money (the bank) to fund the bulk of your purchase. Yes, you need to earn an income and be financially stable in order to qualify for a mortgage. But long as you are able to sustain yourself financially, the rental income can then be used to cover the bond and additional expenses. You can also consider investing with a partner to share the cost.
It’s all about Timing
It’s not about timing the market, it’s about time in the market. Markets are unpredictable, property prices are cyclical, and the timing will never be the same for everyone as you need to take your financial stability and personal investment objectives into consideration. The bottom line is do your research, seek out advice and be prepared to be in it for the long-term to see the fruits of your investment.
You need to Invest in the City if you want Decent Returns
Investing in the UK property market, for example, is not just a London game. In fact, more and more people are opting to live outside of the city where property is more affordable, and commute as their working hours and demands have changed. Outlying areas that are undergoing regeneration such as Derby, Birmingham and Ashford have enormous investment potential. “There has been a surge of young professionals choosing to rent along the commuter belt rather than in London. This is especially noticeable in areas where infrastructure and regeneration projects are underway.”
The Best of Both Worlds
Cash flow is about investing in properties with high rental yield potential, which means your rental income is more than the mortgage and all other expenses attached to the asset. While high yielding properties can bring in a passive income (and can help you build your portfolio), many investors believe capital growth is the key to building your wealth in the long term. Ideally you want the best of both – growth and positive returns in the long term. If you purchase a property that ticks the boxes in terms of location and tenant demand and manage them well over time, you should see the returns you expect. Once again, your strategy should be influenced by your circumstances (responsibilities and expenses) and long-term financial plan.
Local or Global?
If investing in real estate is part of your retirement plan (which it should be), it makes sense to consider buying property offshore to diversify your portfolio. Don’t limit yourself to investing closer to home simply to keep an eye on the property – you can outsource day to day management. “Offshore investment offers income in a hard currency in a stable environment,” says Irving. “And right now, the UK is the place to be. It is one of the best performing and most mature property markets in the world. There are high levels of protection for buyers, and legislation and legal structures are stable, so it’s a very desirable place to invest.”
I Can Do it Myself
You can, but even a seasoned investor risks making mistakes. Tap into the relevant resources and get expert advice on areas that will make a big difference to your bottom line in the long term. At a minimum you should enlist the services of a financial advisor (with expertise in offshore investing), a tax consultant, a lawyer and a credible letting and management agency. All of which Carrick Property can help provide.