Deciding to become a professional property developer and invest in property is no easy step. On the contrary, is it one that requires a lot of thought, consideration, and time to ensure you are making the right decision?
If you, too are struggling to decide if property development is the right route for you, then the following FAQ can help put all your concerns to rest:
1.What is property investment?
There are many misconceptions about property investment and what it exactly entails. The most common route you will encounter – and hear of – is a renovation, where you buy a property to do it up and sell it.
However, whilst this niche was profitable during the property boom of 2007, this investment technique, unfortunately, is less effective during economic downturns. That is unless you have got the cash to turn the property around fast and quickly get it back on the market.
The other route, however – and the one we recommend to you – is buy-to-let. With buy-to-let, you can invest in property based on the area’s tenancy demand and ability to produce positive cash flows and generate month-on-month incomes simply by leasing your property development to tenants. There is no need to sell...
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The fact that it will never go into zero values! Although stocks, bonds, and shares can help you experience annual returns of up to 25%, they are also prone to dipping down to -8%, leaving YOU out of pocket.
With property, it is a much different story. Even in a recession, properties can still produce annual returns of up to 25% – if you invest correctly – making it a much safer, more stable investment route.
3.Do I need capital to invest?
No. Equip yourself with the right strategies, and it is possible to invest in property using little if any of your money and purchase properties without putting your own home at risk.
Investment strategies such as No Money Down or No Deposit Down are specifically designed to help you invest with minimal costs involved. All you will have to worry about is your legal fees and stamp duties, yet even then, it is possible to negotiate such property discounts that your property will essentially pay for itself.
4.Do I need experience?
Despite what the media would like you to believe, you don’t have to have prior property investment experience to profit from property.
The key to achieving long-term successful investments is to: equip your property portfolio with the right investment strategies, negotiate the right property price discounts, but, more importantly, ensure that you only invest in properties that can produce positive cash flows and tenancy demand you need.
Attending a property development course can help to equip you with such investment strategies. Just make sure that you thoroughly research these property development courses first, check their history/case studies and only sign up for a course that can offer you at least 5 investment strategies.
REMEMBER: Not all investment strategies will work in all financial climates, which is why having plenty of choices can come in handy.
5.How do banks lend money for an investment property?
Unlike applying for a mortgage where your lending amount is based on how much you earn, buy to let investment is assessed very differently.
Here, all lenders require that your property can generate 125% of its mortgage repayments through buy to let. Meaning chooses wisely, and it is possible to invest in bigger and better properties than you normally would if it was based on your salary.
6.What are the best properties to invest in?
There is no fixed rule to this, although residential properties primarily win in the investment stakes against commercial property and land.
When you are researching potential property developments, the key points to consider are the property’s tenancy demand, the mortgage deals available, and the positive cash the property can generate. As long as there is demand and the property can produce at least £300 in positive cash flows, it doesn’t matter if it is terraced, semi-detached, or detached.
This information aside, economic circumstances can make one property type more popular than the other. For example, during the recession, studies found that tenants preferred living in terraced properties compared to all other property types because they were better designed and more energy efficient.
7.What is positive cash flow?
Positive cash essentially represents the income leftover from a tenant’s rent after the property’s mortgage repayments have been deducted. So, the larger the property’s positive cash flow, the more profitable the property is.
8.Is it possible to invest in all financial climates?
Yes. If you are looking to enter specifically into the buy to let investment market, then with the right investment strategies, brokers, and negotiating skills, it is possible to invest come property boom or economic crisis.
Take the recent recession. During the last 2 years, we have been confronted with property price discounts of at least 20%, base rates of only 0.5%, and a tenancy demand that has increased by 24% alone during the last quarter of 2009.
However, even with the property boom of 2007, property investment was still a powerful asset. It encouraged rapid capital growth, which prompted rental increases and larger positive cash flows.
The financial climate does not have to play a factor in your decision to invest; it only helps you determine which of your investment strategies will be most effective.
9.Is it possible to invest abroad?
Your property portfolio does not have to remain restricted within one city, region, or country. UK, USA, Europe or Australia… with the right strategies all properties can be transformed into credible property.
The only thing you should be cautious about when investing abroad is familiarizing yourself with their property laws and investment regulations. Every country is formatted using a different system and will employ different methods for lending, organising repayments, and structuring property leasing.
10.Do I have to give up my day job?
No, far from it. The great thing about property is that you can easily research, invest and build your property portfolio in your spare time – for as little as 1-hour property per week – and continue working your day job.
You can even employ a property manager to take care of your properties and ensure that your rent, maintenance issues, and tenant problems are quickly resolved without the need for your assistance.