Property investment can be a great way to meet certain financial goals and certainly comes with a lot of benefits. Nonetheless, it’s not for everybody.
You need to really think about whether the choices of property investment UK areas offer are right for you or if you should explore different options.
Here are some of the key things you should consider:
Are You Prepared For the Risks?
Every investment comes with an element of risk.
The main risk that comes with UK property investing is the fact that your property could decrease in value depending on market conditions at the time.
The good news?
The property market in the UK has proven to be highly resilient and has quickly bounced back in times of uncertainty.
Take the Covid-19 pandemic as a prime example, following which average property prices have broken multiple records. Just look at recent UK property investment news as evidence of this.
Nonetheless, the threat of temporary market drops is something that every property investor in the UK has to accept.
If you’re not ready to accept some level of risk in order to get your rewards, then maybe you should reconsider a UK property investment venture.
Can You Afford a UK Property Investment?
Perhaps the most important question of all when considering how to get into property – can you actually afford a property investment in the UK?
The average property price in the UK is £285,009 as of March 2023, when it was last recorded by the Land Registry UK House Price Index.
Average house prices are even higher in London, but more affordable in cities up North such as Manchester and Liverpool in the North West.
But when investing in UK property, not only do you need to think about the cost of the property itself, but there are also additional costs to consider.
Here are the various costs you need to think about when getting ready to buy a UK investment property:
- A deposit of your property price for a mortgage or payment plan.
- Your monthly repayments if using a mortgage.
- Your cash instalments if using a payment plan.
- Taxes such as stamp duty tax and rental income tax.
- Ground rent costs if you buy a leasehold property.
- Maintenance costs for the property.
- Solicitors’ fees.
- Survey costs.
- Rental management fees, if applicable.
So, here’s how you can work out whether you’re ready for the financial commitments that come with property investment in the UK.
Calculate Your Incomings and Outgoings
This seems like an obvious point, but before thinking about your property investment budget, you should sit down and properly calculate all of your incomings and outgoings.
This will help you understand how much you can afford to spend on a UK property investment venture and means you won’t end up spending above your means as a first-time investor in the UK housing market.
Think About How Much Rental Income You’ll Need
When it comes to building a property portfolio, ensuring that your investment properties generate enough rental income is key, particularly if you’re thinking of using a buy-to-let mortgage.
You need to earn high enough income from rental yields to be able to cover mortgage repayments while still leaving you with a sizeable income of your own.
Soon-to-be property investors can use this rental income calculator to work out how much rent they need to earn from their property investment to cover mortgage payments.
