Property is an incredibly important part of your personal finances. It provides a very lucrative investment opportunity, and the possibility of big capital gains are huge. Property is sometimes seen as a risky investment. Many have lost a lot of money on the housing markets. However, over time, the market tends to follow an upward pattern. If you hold on to your home for long enough, it will eventually make money. Of course, there are other paths to take here. You could rent the property to tenants or renovate it for a profit. As you can see, there is lots of money to be made here! Without further ado, here’s everything you need to know about that first investment.
Markets go up and down… But mostly up
It’s important to remember that the housing market is volatile, just like any other. Think of the stock market or currency trading. They all fluctuate according to numerous market forces. The same is true for properties. In general, the market moves in an upward direction. If you own a property for 20 years, for example, it will increase in value. However, during those 20 years, there may be a number of peaks and troughs. That means there are good times to buy, and bad times to buy!
You need a plan
Buying a property without a plan is always a mistake. Remember, property is an investment. You’ve got to think about the future and how your investment will grow. If your plan is to buy a home to live in for a decade, then the thought-process is much simpler. However, if you plan to rent to tenants or renovate it, you must consider a broader plan. First of all, think in terms of profit margins. How much rental income can you command? What is your timeline for renovation and how is the market performing?
Location is everything
There are all sorts of considerations involved in buying property. You’ll take into account number of bedrooms and the style of property. But, at the end of the day, location is the single most important factor. Location dictates how much your property will increase (or decrease) in value. For families, you need somewhere close to good schools with excellent transport links. You’re looking for an area that is ‘on the up’, not deteriorating.
Of course, when searching for properties, you must consider your budget. First and foremost is the cost of the house itself. How much deposit have you saved and what are your mortgage options? But, this is just the first step. You’ll also need to factor in estate agent fees and legal quotes. There are lots of expenses to look at too. Everything from home maintenance to energy bills should be built into your monthly finances.
What’s your exit strategy?
Last of all, consider your exit strategy. Are you hoping to move on quickly, or stick with the house for more than a decade? This decision will affect everything about your decision, so choose wisely.
That should give you a sound understanding of investing in your first house. Best of luck, and let us know any tips of your own!