Real estate

3 Golden Rules for Investing in Real Estate

housingEverywhere you turn, there appear to be doom-mongers forecasting the imminent demise of the UK (and global) property markets. Perhaps this is force of habit, but in the last few months we have already seen experts predict a decline in the buy-to-let market as stamp duties increase and tax benefits are withdrawn. Now, the Treasury is claiming that house prices will fall by 8% if the UK leaves the EU, triggering a decline that could leave millions of home-owners trapped in negative equity.

While there may be merit to some of these assertions, they are not backed up by the cold, hard facts. Prices are continuing to grow in the south and the Midlands, for example, with the rate of expansion slowing slightly and organically as a result of external economic and political factors. Similarly, house prices are forecast to grow exponentially between now and 2030, bar the occasional short-term blip that is beyond the control of the market.

With this in mind, it remains clear that investing in real estate can deliver genuine rewards in 2016. This is even true in the much-maligned buy-to-let market, which has prospered amid a chronic housing shortage that is still a long way from being resolved. You will need to be watchful and considered when investing in real estate, however, so here are three tips that can help you to thrive:

Get the Location right

If nothing else, you must take time to ensure that you select the right location as a property investor. Whether you are looking to sell the asset or rent it out to private tenants, you must identify viable and popular locations that will enable to achieve a desirable profit or a suitable annual yield.

If you are entering the market as a buy-to-let landlord, you should strive to identify homes in locations that appeal to a specific target demographic. Purchasing homes in a good catchment area for schools is great if you are targeting families, for example, while regions with excellent transportation links will appeal to young professionals. If you are investing to make a quick profit through resale, be sure to select a growth area which is likely to benefit from rising demand and property values in the coming years.

Seek out expert advice and look for wholesale properties

When investing in real estate, it is wise to partner with an experienced property law firm such Withers Worldwide. This will help to guide the investment decisions that you make, according to your budget, level of experience within the market and long-term financial goals.

If you intend to buy and then sell a property for a profit and have the necessary capital, for example, you may well be advised to consider wholesale properties. These are usually sold through auction for a drastically reduced price, either due to the amount of work required to restore them or due to probate issues. In these types of deal the cost of repairs is more than compensated for by the rock-bottom resale price, enabling you to optimise your returns and drive a higher profit over time.

Remember the 1% rule of Real Estate investments

In instances where you intend to purchase a property for the purpose of renting this out to tenants, you will need to keep the 1% rule in mind at all times. This rule will help to determine whether or not the property is worth the required investment, while also informing your profit expectations over a three, five and even ten-year period.

This rule simply states that a rental property should produce a minimum of 1% of the purchase price every single month, at least if you can expect a worthwhile return. If you were looking to buy a property for £150,000, for example, you should be aiming for a monthly rental income in the region of £1,500.

If your returns are lower than this, you may need to consider an alternative investment.

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