What To Know When Investing In Property at a Young Age
The basic principles for investing in property are the same for everyone, but there are a few areas that young investors should be wise to. For some, the eagerness to get on the property ladder means they have made either a poor choice in property or have repayments they are struggling with, and these should be the main areas to focus on for any budding property mogul.
Aim for Good Percentages
When investing in property, the main aim is to make money. For a rental property, you would like to receive about 12% per year. With consistent returns over 10%, you will soon have money to expand your portfolio in the property market.
Remember that you are responsible for your property so you will need to maintain (and redecorate) as required, although you should keep costs down, as such expenses will add up and needs to be taken into account.
If you have an empty property that you find hard to lease you may need to invest a little to make it more appealing or consider lowering the rent to ensure it doesn’t lie vacant.
Get 20% deposit
The most significant problem an entrant to the property market will have is getting the cash together for their first deposit. Young investors should look to have at least 20% of the property value as a deposit especially if you buy to let. If putting up less money initially, you will be charged higher interest rates and possibly insurance on the loan.
By starting to save early, you can achieve a sizeable amount within five years which should be enough to cover the initial payments on a small property.
For those with a smaller deposit or just a minimal credit history, you may want to speak with family about having a guarantor on the loan as this can help keep repayments lower as the lender has the confidence that the loan will be repaid.
Sensible with Money
In the years leading up to your first property purchase, it is wise to start a regular savings account and save a set limit every month as this will establish that you are sensible and strict with your finances to any lenders you may approach for a home loan. Personal credit score information is available online where you can make sure that you have a good score before speaking to a lender or broker.
Shopping for a Lender
Many first time buyers will merely go their current banking institution for loan advice, and whilst this is a good starting point, there are many brokers online which can compare all the primary lenders and also offer home loan repayment calculators and similar tools to help you work out what you can or can’t afford.
A highly regarded mortgage broker will be able to answer any questions and have access to search for the best loans available, whether it is to buy, to let or a standard home loan.
Getting all the information on home loans is critical for first-time investors and making sure you are not straddled with high repayments or large insurance bills afterwards.
As buying a house or apartment is a significant investment over the long term, thoroughly researching where and what to buy is vital. You can access some of the best online property resources available, where you can see crime, schooling, and living statistics to get a far better understanding of the best location to purchase. Speaking with real estate agents in an area you like will help you further realise what you can afford.
Studio apartments are suitable for first-time buyers as the repayments are much lower, but if you have a substantial deposit and are looking to lease out, you will find a small family size home will gain higher returns, more so if you are in a good school area with good transportation and public services.
For those with smaller budgets there are options for partial ownership to help get your foot on the property ladder, these should be rigorously checked as co-investing is not for everyone.
What To Do
Talk with as many real estate agents, mortgage brokers and lenders as you can to gain knowledge of investing. Research property and property trends in locations you have an interest in. Start a disciplined savings plan that will create a fund to start your property portfolio, and will appeal to any lenders you speak with about a home loan.