You may have considered by now, buying into investment property if you want to diversify your investment holdings beyond stocks and bonds. While tales of quick turnarounds or flips— that is buying a home, renovating it, and reselling at a much higher price—dominate TV property TV shows, renting is the true core of property investing.
That’s because historically there has been very little real price appreciation in houses, until recent years (post 2015) until Brexit, which caused another slow down. Renting generates can generate a steady monthly income, like a classic dividend-paying utility stock and recent trends show house prices are creating more profit than most stocks and shares. However, any price appreciation is a bonus for professional landlords.
Are there risks in Property Investments?
But investing in a rental home isn’t like buying a low-cost index fund. Picking the right properties, maintaining them and dealing with tenants—all that takes a lot of hard work. You need to think about whether you’re prepared to put in the time it can potentially takes. Can you handle after-hours calls and on the weekends? What if your tenant doesn’t pay rent? All this can be handled by a local estate agent on your behalf, but then you have the added pressure of working with a company that has no intrinsic interest in ensuring your property is maintained to a high standard as long as their fees are coming in.
What should new landlords expect?
Hawthorne Knight Property Consultant Craig Medford, says landlords ought to be handy and like fixing things. They don’t have to be a DIY enthusiast and most certainly they should hire professionals when it comes to electrics, gas and certain internal repairs. Craig also cautions people who are already juggling extreme hour jobs with children to be very wary. He says “You might not have too many issues with your properties, but that’s the exception, not the norm,”. Medford also suggests anyone considering getting into the property rental business should ensure they have enough savings to handle unexpected repairs early on, before the rental income starts coming in. It would be folly to assume that any property no matter how old or new will be completely devoid of any issues at all.
Property deals are out there
Even though UK house prices have bounced back, deals can be found—if you’re careful, patient or utilise a professional service like Hawthorne Knight. Underestimating the costs of renovation and ongoing maintenance will be the biggest mistake you can make and will quickly eat into your returns.
Before you take the plunge, do your homework. Property website Your Move offers a helpful (and free) guide for first-time landlords here.