When looking to invest in real estate, one of the debates that will naturally arise is whether to purchase property that is off-plan or ready-to-move-in. Over the years, market trends have favoured both at one point or another, and each property type has its respective advantages and disadvantages.
So, as a non-UK resident investor, which option is better for you?
This blog explores the differences between the two to help guide you on which type of real estate investment is better suited to your situation – off-plan or ready-to-move-in.
There is a misconception that investing in property is a goldmine of endless wealth. This is not the case, as real estate investment is risky. Just as you wouldn’t buy shares in a company without understanding what they do, do not invest in property without taking the time to ponder if you’re willing to take the risk.
One of the worst things you can do is impulsively buy a property. Investing in real estate is a major commitment, so you need to go in with a well-thought-out plan of action.
Before beginning your real estate journey, arm yourself with a solid investment strategy and purchasing plan. What type of property do you want to buy? Is it a buy-to-let investment? What areas do you want to look at? What is your budget and how much are you willing to spend? What are your financing options? These are just a few of the questions you need to answer before searching for properties to buy.
In the case of property investment, you can never be over prepared.
Essentially, investing in property is like running a business – and you should treat it as such. You wouldn’t let your emotions or feelings cloud your business decisions, right? The same attitude needs to be applied when investing in real estate.
Rationality and objectivity play a huge role in successful property investments, from the time you’re searching for the right place to the point where you’re renting it out.
Treating your property like a business includes:
When buying a car, cellphone, TV or computer, you would never settle for one without comparing it to other models on the market and asking many questions about its specifications and capabilities. This is because you want good value for money, so you purchase the brand or product that is worth its price tag.
The same principle applies when purchasing a property. In fact, the due diligence that goes into your real estate investment should be even more rigorous. Conducting extensive, thorough research is the key to good property investment. It might be tedious and time-consuming, but you’ll be thankful you did it in the end.
Remember, this isn’t school – if you fail to do your homework this time around, it could have detrimental financial consequences.
Don’t be a hero and fool yourself into thinking you can do everything on your own. Many buyers think that they know it all or can close a real estate transaction without any help.
We highly discourage this, and strongly suggest consulting experts for advice when investing in property. From cash flow and taxes to mortgage repayments, be sure to ask for professional assistance in each aspect of the investment process.
We tend to forget that the real estate market consists of many different parts. For instance, not every country in the UK will have the same market forecast and predictions. The same goes for the different boroughs in London or any other city. Each area’s local market will differ from the generalised market of the city in which it is located.
With that being said, it’s important to learn about the local market you intend to purchase in. That means drilling down on land values, home values, levels of inventory, supply and demand issues and more. Knowing this information will help you decide whether or not to buy a property that comes up for sale in that area.
To invest in property, you’ll actually need to buy property at some point. Some buyers insist on waiting until they find “the one”, leading them into an endless spiral of inaction.
Do as much research and planning as you can, and then take a leap of faith. The only way you’ll know if you made the right purchase is to buy the property and see for yourself.
If you intend to rent out your property, you’ll need to keep your future ideal tenants at the forefront of your decisions. For instance, if your potential renters are a family, they’ll want a low-crime area with good schools. Singles or couples may be looking for nearby nightlife or easily accessible public transport.
The best advice is to always think like tenants so that you’ll know who to target your rental property toward.
Chances are the market will rise, not fall. So, don’t hold your breath waiting for a downturn that may never come.
Paying more than everyone else isn’t a good investment strategy – avoid, avoid, avoid!
You’ve set a budget for a reason. Overextending yourself financially will only lead to trouble.
Buying older properties comes with the risk of being outdated, as well as needing a lot of maintenance and repairs. New properties, on the other hand, often experience lower vacancy rates and maintenance costs, as well as offer a better profit when reselling.
We understand that investors want to reap as much profit as they can when investing in property. However, by negotiating too much, you can miss out on good deals. Once you feel the deal is profitable, try to proceed without wasting too much time, rather than trying to become a millionaire off your first investment.
More often than not, a handshake means nothing in the property market – especially in the UK. Never make the mistake of thinking you’ve sealed the deal with a handshake – it’s never done until the paperwork is signed, witnessed and the keys are in your hands.
Remember, without a contractual agreement in place, the seller can pull out any time or change the terms and conditions.
Using a mortgage to fund your property investment enables you to profit from borrowed money. This massively boosts your returns and yield on your capital investment (the deposit). However, if you get the financing wrong, your profit could disappear.
A common mistake that investors make is overspending on renovations. Do your due diligence to understand what adds value to your property and try to focus on that only.
The mortgage payment isn’t the only expense associated with property investment. There are many ongoing costs regarding upkeep and maintenance, as well as insurance fees and property taxes.
Lastly, one of the biggest mistakes you can make when investing in real estate is not hiring a property manager. Trust us, you’ll immediately regret self-managing from day one on the job.
Your property is your asset and it needs to be looked after – and who better to do that than a professional?
When searching for your next investment, you can never go wrong with purchasing real estate. To be successful, however, you’ll need to avoid the above mistakes.
Now that you’re prepared with a list of misjudgements to avoid, there’s only one thing left to do – start looking for a great property to invest in. And where better to start than with Magnate Assets?