Investment strategies for property buyers

When you buy properties as an investment with the express aim to let them, you need to ensure you have the right strategy in place. There are many things you’ll need to plan for and take into account before you rush in and commit.

The first thing is to consider your finances and make sure you have the funds to back up your purchases. It is always best to have a cash reserve in place because this will be more accessible at short notice than trying to arrange a loan or mortgage. Having good liquidity is key to a successful strategy.

The basic thing to remember with buy to let properties is that you won’t make a huge income from them. You’ll need to ensure the rental income covers your mortgage and fees for management, maintenance and insurance. You may get a small return on top of this, but you shouldn’t push for it too much or you could face alienating potential tenants with your high rent demands.

With buy to let, what you want to see is your cash flow improving over time. This will happen if you balance the mortgage payments and pay off the interest. You should also keep an eye on the value of the property and ensure it is going in the right direction. In the best conditions you’ll experience improving cash flows and higher net worth because the property will be more valuable than when you started.

Your investment strategy should always be focused on the long term as this will give you the best potential for your net worth to grow. A short term focus will usually only provide smaller returns and will also leave you frequently looking for new properties to purchase. In crowded markets with high demand like London, finding a property can be difficult, so it is always a good option to hold on to them for longer.

Releasing equity at the right times is really important and can provide fantastic benefits. The theory is that by doing this you can transfer the risk to lenders if the value of the property falls. You could also find yourself with negative equity, i.e. where you have a mortgage for a certain amount but the property value falls below this level. In these cases the lender carries far more risk and you can find yourself with a great deal of cash in your bank.

Buying at the right times is a key mantra of many property investors but this may not be as clear cut as it seems. Typically you would think it is best to buy when prices are low but this can make it more expensive to secure financing. In boom periods finance is typically easier to find because there is confidence in the market. Thinking broadly there is no bad time to buy, particularly when you can hold on to properties until values return.

Having the right strategy is important but you need to make sure you can adapt it as and when you need to. If you need advice and guidance on any aspect of making a property investment, we are the people you can always rely on for informative, knowledgeable services. From investments to property management in Richmond Upon Thames and beyond, we can do it all.