The best way to invest in property
Buying a property outright
This is the common well known option. There are several risks when you buy property directly, whether for yourself or as a buy-to-let investment.
- Money tied up – unlike shares or bonds, it takes a long time to sell property.
- Big commitment – when you buy a property, you’re putting a lot of eggs in a single basket.
- You have to come up with 25% deposit in most cases, which is a high amount to tie up for a period of time.
- Buying and selling costs – with estate agent and surveyor fees, stamp duty, land tax, solicitors’ and conveyancing fees to consider. From 1 April 2016, you’ll have to pay an extra 3% on top of each Stamp Duty band when you buy an additional home or a residential buy-to-let property.
- Demanding – doing maintenance work and managing property takes time and money. You might need to extend the lease – if you don’t own the freehold outright. This is another cost and can take some time to negotiate.
If you use a mortgage or a loan to buy property, there are additional risks:
There’s no guarantee you’ll earn enough rent to cover loan repayments.
The cost of the mortgage might rise.
If you don’t keep up with repayments, the bank or building society can take back the property.
Other options
- You can appoint a property sourcer to find you a property that is available at a lower price as some vendors are looking to sell in a short period of time. If the property need updating, you can refurbish the property and sell it on. You can move on to the next deal.
- You can work with another investor, who gathers a pool of money from a number of investors and refurbishes the property and returns the revenue back to the investors. Your money is safe as your lawyer will put a charge on the property protecting your percentage. You need to check if the sums add up before getting into the deal and do your research as well as going through presented numbers. This method enables you to invest with lesser amount than the full deposit.
- Joint venture would be also a great way to get involved. A property sourcer or an estate agent can put you in touch with vendors who would be interested in updating their property without the cost of buying fees and mortgage monthly payments. In this option you update the property and share revenue with the owner of the property. Again your lawyer would put a charge on the property protecting your investment.
If you have any questions regarding how to invest in property, please contact Pelin Martin on 0208 994 7327 or email pm@bluecrystallondon.co.uk – www.bluecrystallondon.co.uk
