Rules to successful investment property 2008
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by: Sara Huck030
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Mistakes to watch out for in Investment Property 2008
You should always approach property investment with a long-term view. Never expect to ‘get rich quick’. Medium to long-term property has outperformed all other asset classes, building a sustainable correctly geared portfolio over a number of years is the most appropriate method.
1) Never over extend on borrowing
Borrowing should never be over extended, aim for a maximum of 75% lending. Ensure that you can finance any borrowing throughout possible rental voids and changes in interest rates. Remember, as many first time buyers are struggling to get on the property ladder – THEY ARE RENTING! The rental income you obtain will pay the interest on your lending.
With 25% equity and 75% lending the average return on your investment is 45% - (45% ROI is based on the average UK growth of 11.3%pa over the last 4 decades – source ODPM)
Potentially, you can almost double your capital investment every 2 years.
Many investors will then use the increased equity in their property to fund further properties – in that way building up a property portfolio. This is recognized as ‘Gearing’.
What if you don’t have 25% deposit, but you still want to take advantage of the under market value properties out there? UK off plan property investment could be the solution to your problems.
With less than a 5% deposit you can invest in many UK off plan apartments in landmark projects that are set to be complete in 2, 3 and 4 yrs time. This method may work for you, by making a low capital investment now and allowing the property market to work through its cycle. For example in 2011 when the off plan apartment comes close to completion, it will only be at that time, you will need to arrange a mortgage.
2) Diversify your portfolio
Two types of diversification: The type of property you buy and the geographical location of it.
You will need to spread your property investments around the country to achieve an annual growth figure of 11.3% (which is the average across the whole of the UK over the last 4 decades – source ODPM). For example, in 2006, growth in London and the South East may have been around 16%, whilst in Scotland, it may have been 8%. If you had invested in properties in London and Scotland you would have achieved an average return of 12%.
‘Historically, interest rates are still low…. 50% lower than in the early 90’s. If you can get a good fixed rate mortgage now for 3 or 5 yrs plus, why would you not invest?’
Research, research, research – regeneration plans and new rail and metro links are good indicators of up and coming areas and capital appreciation. Great access to transport links, restaurants, bars and local facilities. Knowing the area you are buying into and considering who your ideal tenants will be. Quality locations will attract quality tenants.
Concentrate on long term demand where supply is not exceeded. For example:
Leeds Landmark development - One of the tallest residential buildings in Europe
The Lumiere, nick named ‘the kissing towers’ is a 4yr off plan capital growth potential scheme set to Complete in 2011 - The tallest tower will be 52 storey’s and the smaller one will have 30. The Architects - ‘Ian Simpson’ with a statement ‘to inspire all’, won the Civic Trust Award 2008. The towers will stand a 2 minute walk to shops, bars & restaurants and Leeds central station Leeds is the UK’s largest centre for financial and business outside London and the Economy (£13.6 billion) projected to grow a third in 10yrs. To reserve an apartment in one of these Landmark towers, you only pay a deposit of 2.5% in 2008.
About the Author
This article was written by Sara Huck from Quay Property Investments, who manage their own UK and Overseas property portfolios of investment property, discounted property and investment land plots. This large portfolio means they can find the best investments to meet your needs, in many different property hot spots around the world. Find out more about Media City investment Property.
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