3 Key factors to consider when investing in property
- 08 Jun 2021
A long-term and typically stable investment, property can form a successful backbone in a diverse and growing financial portfolio. However, while the asset is often less volatile than other investment types like stocks and shares, there are certain things that you’ll want to consider if deciding to invest in property to ensure that you get the maximum returns possible.
Want to learn more about property investment as a potential next addition to your portfolio? Here are three key factors that you may want to consider.
Buy to let investment (where you buy a property for letting purposes and then rent it out to tenants in order to make additional income) is a fantastic way of using your asset in order to generate regular returns that you can funnel into savings or alternative investment strategies. However, if looking to purchase a property for buy to let purposes, you want to make sure that the property you’re investing in has the best rental yield percentages possible.
In their extensive guide to UK property investment, RWinvest cite cities in the North West such as Liverpool and Manchester as the best in the country for rental yields currently. In fact, according to Totally Money’s Buy to Let rental yield map, Liverpool’s L1 postcode is the only in the country to reach rental averages of 10%.
Capital appreciation (known more simply as house price growth) refers to the increase in value on a property. House price growth isn’t guaranteed, and you want to invest in a property type in an area that ensures it will rise gradually over time, so that when you decide to sell down the line, you will be able to make further profit.
You may have a specific area that you’re interested in for investment, but take a look at the general house price index and see how areas are set to perform based on predictions and forecasts from the likes of Savills etc. If you’re set on owning a property for a certain period, say for five years, for instance, this might influence your decision. Remember, property investment is a long-term venture usually, however, and your funds will often tied up and inaccessible. Only invest if you can afford to allocate the funds, and are aware of the risks involved.
Surrounding area growth is important in a property’s capital appreciation, but it’s also important for driving interest in the area and resulting tenant demand going forward. Again, in cities like Liverpool, for example, where plenty of regeneration projects are underway for the future, the opportunity to get seated within an area that’s only going to rise in popularity is exciting for the savvy investor.
Particularly if you’re a buy to let investor that wants to maintain consistent tenancy in your property, you’ll want to make sure that you have enough demand in the area you’re looking at, and that the rental property you’re looking to provide suits those demands. Student property, for instance, is rising in demand across city centers, and so this is a popular option for investors.