Starting a business and turning it into a success is a tough task, and those that manage it stand to transform their lives. However, successful entrepreneurs who turn their dreams into highly profitable realities can find themselves with an unprecedented and significant amount of wealth, asking themselves how they can make their newfound capital go further.
One popular option for savvy investors has been the UK property market. Many believed that Britain voting to leave the European Union would have a significant negative impact, but the reality has been somewhat different. While the full ramifications of Brexit will not be felt until the UK has left the EU, investors can be confident that the supply and demand imbalance that exists in London should keep the market buoyant. It is this continued resilience which makes the capital a profitable choice for investors and entrepreneurs looking to make the most of their capital.
Historically, high monetary thresholds have kept property investment out of reach of the majority of would-be investors. However, new models with thresholds as low as £20,000 per investment have opened up the market to many successful entrepreneurs who would never previously have been able to invest.
New investment platforms can help investors place their funds in a range of real estate projects without the burden of managing a buy-to-let property or overseeing a development project. Instead, investors more options to choose from, particularly regarding how much equity they wish to invest and in what projects.
Real estate investment is not an exact science and while it does have its associated risks, there are some guidelines that can put new investors ahead of the game. Below we’ve detailed five top tips for curious entrepreneurs looking to get into property investment.
- There is no such thing as too much research
No two properties are the same and there are a wide range of factors that can influence the property market. It is always prudent to research any investment under consideration as much as possible. Although a good property investment firm will employ an experienced team of experts who handpick opportunities for you, it is still vital to conduct independent research. At the end of the day, it’s your own capital at risk and the more information you have the better a decision you’ll be able to make.
- Don’t forget the importance of location
The ongoing debate is whether to invest in current high value areas with greater rental yields or to aim for an up-and-coming area, which has potential for growth. Areas in central London are almost always going to provide profit with high rental returns but investors who have looked to less popular locations, such as Birmingham which is set to be linked to London via the Government’s upcoming high speed rail link HS2, may experience greater returns on their initial investment. Ultimately, only the investor can decide and the advantage of using open equity platforms, is that opportunities are presented on a deal-by-deal basis, offering the investor flexibility when choosing location.
- Always seek advice
Although real estate investment can be extremely rewarding, it is crucial that investors feel completely comfortable with the investment they are making. Prior to committing to any property investment project, investors should explore all advice avenues, including legal and financial. Legal advice helps you understand your tax position and trust developers. Financial advice provides you with a holistic understanding of your investment, including where your money is going and what returns to expect. Good practice entails gaining a secondary perspective from qualified professionals, who can objectively evaluate the investment.
- Join a community of investors
Being part of a community of investors rather than investing alone offers easy access to support and advice from peers, which can help inspire confidence in investments and provide guidance when things go wrong. Additionally, by offering lower thresholds, investors can spread their assets over a far wider portfolio than if they were operating solely as a single entity.
- Understand the exit strategy
Residential property investment offers two main avenues of return: buy-to-let and buy-to-sell. Buy-to-let investments offer rental returns on a monthly basis, creating a steady income stream. This, however, may take longer for the investment to be recouped and profit to be realised. Buy-to-sell investments allow the investor to receive the return from their investment upon sale of the asset. This type of investment is more exposed to market fluctuations, subjecting your equity to the increase or decrease of the market. As an investor, it is important you understand the strategy in place at the outset. This allows you to monitor your investments and return, making the most of your capital.
There is no guaranteed script for success in something as susceptible to outside forces as the property market. Although it is impossible to assure profit, by following this guide you can better position yourself to avoid pitfalls and make the most of new opportunities from property firms and the investment sector.
By Tal Orly, CEO and founder of Cogress