Property is one of the most popular forms of investment. And there is a good reason why a growing number of Brits are deciding to invest in real estate. It provides a return of up to 15 per cent a year, which is much more than many other investment options, especially those of a comparable level of safety. But while property has turned out a great idea for a large number of people, it didn’t turn that good for others. On the contrary, it turned out to be a very costly mistake. So is investing in property – a good idea or costly mistake?
So before you decide to invest in property either to rent it or sell it later at a better price, you are recommended to keep in mind the following:
Location, Location, Location
No matter if you are planning buy-to-let or sell for a profit, keep in mind that location is everything. Not that the actual property doesn’t matter – it does, a lot – but some locations are more likely to be profitable than the others, not to mention safer. For example, there will always be high demand for real estate in central London. But so will be for properties with good transportation links, proximity to good schools, etc. So when looking for properties to invest in, be sure to consider their location.
Future Market Trends
Even though it currently seems that nothing can stop the growth of the real estate prices, these are much more vulnerable to the market trends than they may seem at a first glance. Unfortunately, there is no way to tell how long the current trend will continue and when, if ever at all, it will show down or possibly even reverse. As long as the demand will exceed the supply, there is generally no need to worry about the “performance” of your investment. But it’s important to keep in mind that we’re living in highly uncertain times and that no one really knows what tomorrow will bring.
Mortgage Interest Rates
Unless you have inherited a handsome sum of money or won the lottery, you will probably have to take out a mortgage to purchase property. The income or profit it will earn you thus obviously depends greatly on your mortgage interest rates. Also, don’t forget on other “dangers” that are associated with mortgages including rising rates and having difficulties with repayments for any reason. In the latter case, you are not only losing profit but you are also risking losing the property.
Repair Costs, Tax, Insurance and Other Costs Associated with Owning/Renting a Property
When calculating the return of investment, many people forget to consider maintenance costs which are not negligible, no matter if you’re investing in a one bedroom flat or four bedroom house. And if you don’t take care of repairs immediately, they get even costlier and more difficult to deal with. Then there is also the tax, insurance costs, advertisement fees, agent commission and a number of other costs that are associated with both owning and renting a property. And they are all eating into your profits.
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