Thinking of Buying an Investment Property? Here's What You Need to Know

12 April 2022

Purchasing an investment property can give you both an excellent income and help build a legacy for the future. However, property investment when you’re a beginner can be daunting – and with so much money involved, investing in property is certainly not without risk. 

 

In this article we’ll look at:

 

 

Is property a good investment?

 

Property will always remain a good investment, whether you’re looking for a regular source of income or looking to make money over time through capital growth.

 

How do you start investing in property?

 

Investing in property requires time, research and, of course, money. This is why it is important to speak to your estate agent to make sure it’s right for you and it’s a good idea.

 

1.Your investment strategy

 

Before investing in property, think about the direction you want to go in and what outcome you want to achieve. 

 

Property investment comes in several different forms:

 

Buy-to-let

 

A buy-to-let strategy means you will be buying a property with the sole purpose of renting it out to tenants. 

 

Buy-to-let can provide a steady income for as long as you need, while a long term buy-to-let strategy can offer capital growth opportunities.

 

However, you need to think about managing your property and complying with private rented sector regulations, which are complicated.

 

Property development

 

If your aims for property investment are more short term, you could consider property development.

 

By finding a property in need of renovation, you can add value through the work you carry out before selling the property on or for profit.

 

However, the profit you make will depend on:

 

 

Flipping

 

Flipping is a risky property investment strategy, but also one of the most passive.

 

Flipping would see you purchase a new-build property off-plan before selling it out for a profit once the build is complete 

 

The risks with flipping occur when:

 

 

2.Investment location

 

The area you choose when investing in property can make a huge difference to how successful the outcome is.

 

If you’re thinking of purchasing a buy-to-let, you’ll need to research:

 

Meanwhile, if you’re thinking of developing a property, think about:

 

3.Type of property

 

With buy-to-let investment, it’s key to purchase the kind of property that tenants want to rent.

 

For example, if the area you plan to invest in is full of young, single professionals, a buy-to-let flat would probably be a more successful investment compared to a three-bedroom house.

 

Researching the area can also give you an idea of how successful the property type could potentially be. For example, investigate whether modern-properties are popular or if something older with more character is what people tend to look for.

 

4.The importance of purchase price and yields

 

The price you pay for an investment property can have an immediate effect on your rental returns if you are purchasing a buy-to-let. If you’re buying a property to develop, the purchase price is key to the amount of profit you will make when you sell.

 

For a buy-to-let, your property’s rental yield will give you an indication of how well it is performing and give you an idea of the return you’re getting on your original investment. 

 

Before investing, work out the potential gross yield you could achieve from each property you’re considering.

 

5.Target tenants

 

Along with location, you should know the type of tenants you want to attract to your rental property. 

 

Do you aim to attract single young professionals or couples? Will they be commuting to and from another town for work? If so, an apartment or flat close to transport links and amenities might be a good option for your investment property.

 

Whereas, if your target tenant is a young family, a larger property with a garden and catchment area will be a priority.

 

6.Budget, funding and cashflow

 

Before investing, think about how you will fund it.

 

Buy-to-let

 

If you are purchasing a buy-to-let, this may be through a buy-to-let mortgage.

 

Buy-to-let mortgages tend to come with stricter lending criteria compared with standard residential mortgages, including:

 

 

If you’re buying a property to develop then sell on, you will only be able to fund this through a mortgage if the property is habitable. For properties that a lender considers ‘unhabitable’, you may have to consider either a bridging loan or development finance.

 

7.Management and maintenance

 

When purchasing a buy-to-let property, you will need to think about ongoing maintenance and property management.

 

The most passive approach is to use a letting agent who will:

 

 

8.Landlord taxes

 

When becoming a buy-to-let landlord, you are required to know about the various taxes that could impact you.

 

These include:

 

2022

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2021

How the Scottish Housing Market has Changed Over the Last 50 Years 2021-12-27 Can I Get a Mortgage Without Permanent Residency? 2021-12-20 Property Conversion - Everything You Need to Know 2021-12-15 Asking Price - Everything You Need to Know 2021-12-06 Using a Home Report When Buying a Property 2021-11-29 What is Shared Ownership? 2021-11-24 What You Need To Know About Getting a Mortgage When You're Self-Employed 2021-11-19 So, What Is a Mortgage Agreement in Principle? 2021-11-08 Why You Should Use a Solicitor Estate Agent When Moving House 2021-11-03 Thinking of buying a listed property? Here's what you should know 2021-10-26 Everything You Need to Know About EPC Registers and Certificate Guides 2021-10-25 How much can I afford to borrow? 2021-10-20 Nine Steps to Selling Your Home 2021-10-18 Climbing the Property Ladder 2021-10-11 Fire Alarm Laws are Changing in Scotland 2021-09-27 Research You Should Conduct Before Buying a Property 2021-09-20 The LIFT Scheme and How You Can Use It To Buy a Home 2021-09-17 The Latest Scottish Government Guidance on Property Viewings 2021-09-10 NORMAL SERVICE BEING RESUMED IN A BUOYANT HOMES MARKET 2021-08-31 Should You Refurbish Your Property? 2021-08-18 Preparing Your Home for a Successful Sale 2021-08-13 Mortgage Interest Rates - What are they? 2021-08-09 Helping You Consider the Right Location for Your Next Move 2021-07-26 Tips For First Time Buyers To Help Get Them on the Property Ladder 2021-07-19 Scotland's First Home Fund is Closed, What Other Schemes Can Help First Time Buyers? 2021-07-12 Retirement Interest Only Mortgages - What You Need To Know 2021-07-07 How the UK Mortgage Market Has Changed Due to Coronavirus 2021-06-30 How To Boost Your Mortgage Deposit 2021-06-21 New Rules For Fire and Smoke Alarms in Homes Across Scotland 2021-06-17 Preparing To Put Your House on the Market in 5 Key Steps 2021-06-14 How Much Mortgage Can I Get For My Salary? 2021-06-09 How Long Does it Take to Buy Your First House or Flat? 2021-06-02 Is Your House Ready to be Sold?: House Selling Checklist 2021-05-31 What is a Mortgage Agreement in Principle? 2021-05-25 All You Need To Know About EPC Registers and Certificates 2021-05-19 Making the Most of House Viewings 2021-05-12 How the Coronavirus Pandemic has Changed the Priorities of Scottish Home Buyers 2021-05-05 Top Tips on Preparing to Buy a House 2021-04-26 What You Need To Know About Overpaying a Mortgage 2021-04-21 Advice on Buying a Property During the Covid-19 Pandemic 2021-04-14 How the UK Mortgage Market Has Changed Due to the COVID-19 Pandemic 2021-04-13 Scotland's First Home Fund: Applications Now Closed 2021-04-09 Scotland's First Home Fund 2021-04-07 Scottish Stamp Duty Holiday: How Did LBTT Change and When Did it End? 2021-04-06 Property Questions Answered 2021-04-02

2020

Tayside housing market back with a bang 2020-12-10 Digital Guide 2020-05-27

2019

The property market across Scotland - Quarter Two 2019 by SPC Scotland 2019-10-16 LORD PROVOST OPENS NEW-LOOK CENTRE 2019-09-17 The Dundee property market 2019-06-24 A 427 MILLION BOOST FOR THE HOMES MARKET 2019-01-21

2018

Budget Proposals to the ADS Rate 2018-12-18 BUYING OR SELLING GET THE FACTS 2018-08-24 BUYING INTO LIFE ON THE WATERFRONT 2018-08-23 As moving day looms dont panic just prep 2018-05-17 THE BEST OF BOTH WORLDS FOR HOMEBUYERS 2018-04-03 HOME COMFORTS FEND OFF BEAST FROM THE EAST 2018-03-07 V&A DATE MILESTONE FOR THE WATERFRONT 2018-03-02 FLAT SALES EDGE TOWARDS £100 MILLION 2018-01-23 PROPERTY SALES PUSH TOWARDS THE £440 MILLION MARK 2018-01-08

2017

FESTIVE GREETINGS FROM ALL AT THE TSPC 2017-12-19 PUTTING DUNDEE ON THE MAP 2017-11-15 TIME TO BRING YOUR HOME TO THE MARKET 2017-11-01 AUTUMN IS A GOOD SEASON FOR SELLING 2017-10-17 HIGH PROFILE OPTION FOR TOP PROPERTIES 2017-10-09 MARKETING YOUR PROPERTY TO THE MAX 2017-08-21 DO YOU LIKE TO BE BESIDE THE SEA? 2017-06-15 TIME LOOMING FOR A RE-MORTGAGE 2017-06-09 HAS THERE BEEN A BETTER TIME FOR A HOUSE SALE 2017-05-26 TIME TO PUT YOUR FLAT ON THE MARKET 2017-05-04

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