Where once the likes of Property Ladder, Homes Under The Hammer, and Location, Location, Location made it seem as though the UK housing market was an ever-expanding bubble, that could never burst, the harsh realities of the past few years have turned ‘property investment’ into dirty words.
Yet, the grim economic climate has affected everything from the property market to stocks and shares, commodities, savings accounts and beyond meaning that those with money to invest seem to have very limited options. Given the blanket media coverage to the contrary, you may actually be surprised to hear that investing in property is still very attractive.
The days of buying a property, holding onto it for six months and then selling it for outrageous profits are long gone – indeed, the average house price in the UK rose by 1% in 2011 before falling by 1% in 2012 – but there are various avenues where a tidy profit can still be gained.
So if you’re new to property investment, you need to know the basics before you make your first commitment. Read on for the lowdown on investing in property.
The media darling of property investment is development given the ‘rags to riches’ sheen achieved by turning a rotten shell into a shiny new home. The idea is simple: find a house in need of modernisation or renovation, give it the makeover it needs and sell it on to collect your profit.
Like I said, simple. However, this method of investment is surely the riskiest for a number of reasons. First, it is ultra-competitive. There are only so many houses in need of renovation and this has pushed the prices of this type of property a little higher year on year. You are also competing with seasoned developers with contacts designed so they hear about potential goldmines before you do.
Secondly, houses are notorious for throwing up nasty surprises. If you are a first time renovator without the eye of experience you may find that you wind up buying a money pit and making no money whatsoever.
However, the rewards of doing this job, and doing it well are huge – both personally and financially – making it the most romantic of all investment opportunities.
One thing is for certain: there are fewer first time buyers around now than ever before. The requirement for large deposits and the still high price of houses means that twentysomethings looking for their first home are forced into renting.
Which is where you step in. The buy-to-let route of investment is attractive as there is potentially much less work for you to do to get your return. Buy a house, market it to rent and collect a monthly income. Of course it is a little less straightforward than that but if you crack the formula, this could be a tidy little earner.
There are pitfalls, such as the risk of your house remaining empty leaving you without an income, or the possibility that you may end up with undesirable tenants, but the right property in the right neighbourhood could be a regular little money spinner.
This is the most hands off method of property investment and involves nothing more than finding a fund looking for investors. A property fund is managed by the fund manager who looks after a joint portfolio of property. If the portfolio performs well, you get a profit. If not, you don’t.
As noted above, if you prefer to be completely hands off, this is the option for you but beware – if the fund performs badly, you have very little control over what you can do, other than take what’s left of your money out.
Probably an option for a more stable market.