Top Property Investment Tips For Newbies

By Sadie Brody | July 31, 2020

Property investment is a fantastic way to generate an income, you can take a hands-on or hands-off approach, depending on your needs and goals. For beginners, property investment can be a little daunting. There’s much you’ll need to learn before you get started. To help you make a start on your property investment journey, take note of these tips.

Determine a strategy

The first step is to determine which property investment strategy you are going to use. There are essentially two property investment strategies; the first is property flipping and the second is purchasing a rental property. Within these two strategies there are various considerations to be made.

Property Flipping

Property flipping is a popular property investment strategy, so what exactly is property flipping? Flipping involves purchasing a property, renovating it, and then selling it to make a profit. Imaginably, you need to be strict with your budget if you’re going to flip a property. Spending too much on the renovation could easily compromise how much profit you’ll make. With property flipping you can make a great deal of money in a short space of time.

Property Rental Investment

Property rental is an attractive option for many new investors. You might choose a Single-Let property strategy or a HMO investment. Single-let properties are usually rented out to families or working professionals. You rent the house to one individual or one group (instead of individual renters). HMO investments are also called ‘house shares’. With a house share, you rent out each room on an individual basis. HMO investments have a higher earning potential, however you will have more admin and maintenance issues to deal with. For beginners, purchasing buy-to-let is the easiest way to get into the property investment market.

Property Rental Investment Tips

1. Property management companies

If you decide to purchase a buy-to-let property the best advice is to invest in a property management company. So what exactly does a property management company do? Property management companies handle each and every aspect of managing your property including marketing, repair and maintenance, tenant complaints, admin and so on. Perhaps you like the idea of earning money but you don’t want to get involved with the management side of things? If so, a property management company is certainly the way to go.

2. Determine the risks

All investments arrive with some element of risk. It’s important to determine the risks associated with your investments, so that you can make wise choices. It can be helpful to look at market predictions before you make your initial investments.

As the coronavirus pandemic continues, many are concerned about the impact on the housing market. People are left wondering whether now is still a good time to purchase a property. Nick Bailey, of Real Estate Maximums, suggests that there is still a significant demand for property. He stated that, ‘the population is increasing and the largest age group, millennials, are in their peak home-buying years so the demand side remains strong.’

3. 3. Study the property market

It’s helpful to study the property real estate market before you make any moves. Rental properties are currently in high demand in the USA, meaning that buy-to-let is a wise investment. To help you study the property market, check out the following resources:

National Real Estate Investor Magazine: Here you’ll find plenty of useful advice and trends related to the real estate market. Recent articles have included ‘How Apartment Renter Prefaces Are Changing Because Of The Pandemic’ and ‘Strategies For Identifying Market Value.’

Realty 411 Magazine: This magazine has plenty of info on market trends, finance advice and more. There are also plenty of links to real estate themed webinars, to help you educate yourself further.

4. Choose your tenants

You need to know which kind of tenants you are targeting so you can purchase a property that matches their specific needs. Are you looking to rent to families? If so, you need to consider the schools in the area, the safety of the neighborhood, and child-friendly amenities. Perhaps instead you want to rent to students? In this case, you should choose an area that’s inexpensive, lively, and with close connections to the universities.

5. It’s all about location

Location is crucially important in the world of property investing. You should research which areas can earn you a great yield and go from here. So which are currently some of the best buy-to-let neighbourhoods in the USA? Well, according to Global Investments Incorporated areas such as Memphis, Detroit and Ohio can get you returns of up to 35%.

6. Get Landlord Insurance

Landlord insurance is a type of home insurance that’s specifically for rental properties. Generally speaking it includes at least one of these types of cover:

Liability insurance: Liability insurance can provide you with legal cover if you end up going to court.

Buildings insurance: This type of insurance covers damage to the features or structure of the building.

Contents insurance: Contents insurance covers the items inside the property from curtains to carpets and furniture.

Property Flipping Investment Tips

1 . How to add value

Property flipping relies on adding value to a property, and once you’ve added value, you’ll see a larger ROI. So how can you add value to a property?

Extend living space: Extending the living space is one of the easiest ways to add value to a property. You could do this by building a kitchen extension, building a garden office, adding a conservatory, or considering a loft or cellar conversion. Any of these renovations can increase the value of a property by up to 20%.

Kitchen renovation: Virgin Money suggests that a brand new kitchen can add 6% value to a property. These days our kitchens are a social space as much as functional space. We owe this to trends such as kitchen islands (or double islands), and open plan living spaces!

Triple Glazing: Triple glazed windows improve security and energy efficiently. It’s been suggested that you can add 10% value to a property with these windows.

2. Start slow

As a beginner you’ll want to start slow, don’t purchase too many properties all at once or you’ll be in over your head. Once you’ve got the hang of it, you can expand your projects to create a diverse portfolio. For diversity, purchase different types of properties, and focus on different areas. A diverse portfolio like this can boost your cash flow and reduce risk levels.

3. Budget wisely

When you’re entering the property market it’s important to budget wisely. Remember, unexpected costs may crop up so you should be prepared for these. You need to have enough money set aside to regularly maintain your properties, keeping your tenants happy and safe. You’ll also need to budget to pay your property management company, and any taxes you’ll incur throughout the financial year.

4. Avoid properties can need extensive work

When you’re first getting into property flipping it’s best to avoid properties that need extensive work. Choose a property that needs minor repairs and has plenty of potential to add value (without a huge investment). A property that needs too much maintenance could end up being way more hassle than it’s worth.

5. Create your flip team

If you want to flip properties you need a great flip team behind you! Your team will consist of various people including architects, contractors, real estate brokers etc. You might have a talent for renovation, finance or otherwise, but you won’t be able to do everything! Building yourself a talented team is the best way forward.

6. Bring your contractor 

It’s a wise move to find a great contractor before you make a decision on a purchase. Then, take the contractor to your property viewings. Your contractor can offer advice on how much work the property needs, helping you to make the right decision. They can provide an estimated time frame of work and let you know if you’re going to need a permit. 

7. The 70% Flip rule

Property flippers have a 70% rule, but what does this mean? Well, the idea is that you shouldn’t pay over 70% of the property’s value after it has been repaired. For beginners, property flipping can be risky, you’ll need support, or you may prefer to invest in buy-to-let first.

8. Don’t forget tax 

When you are flipping properties you’ll need to consider taxes as part of the process. For instance, if you carry out your property flip using a company, that company will be liable to pay corporation taxes. On the other hand, if you invest as an individual, the profit you make will be calculated as part of your income tax. Corporation tax is less than income tax, so many investors establish a company to use for their property investments.

Starting out in property investment is far easier when you’re prepared and organized. Take all the tips you can get and avoid taking too many risks as a beginner.