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Interested in making money from property? How to get involved

19th May 2016 Print

Anyone who has pitted their wits against their family in a game of Monopoly will know the merits of investing in property. It may be just a game – albeit one of the best selling of all time – but it does capture the essence that property can be a highly lucrative asset.

It’s a lesson that stays with us all largely because it is true. Investing your money in property can cause it to grow, and grow at a rate that far outstrips leaving it in a savings account with a meagre interest rate.

Most of us are fluent in the language of property – unlike some of the more complex realms of the stock market – which serves as a useful starting point. So, if you want to take your knowledge of property and tap into the power of the market to make money, how do you get involved?

Take it seriously

This isn’t Monopoly any more, this is real life. Ill judged and poorly informed judgements, as ‘How To Be A Property Developer’ host Gary McCausland points out, could leave you in financial trouble. Plan properly, do your research and stick to your budget to succeed. Treat this like a business, whether this is a sideline or something you’d want to do full time. Have a proper budget in mind, set yourself financial targets and set up an account to handle your property transactions. Without rigour, you won’t thrive.

Learn from the masters

Have a look at how the experts make money in this field. Take a company like First Urban

It snaps up land and property across the country, improving it through investment to help it rise in value. On a smaller scale, that’s the way forward for you. You need to spot property that can attract a strong rental income, for example, or one that could shoot up in value with a little work. You might not be able to match the big companies, but you can learn a lot from understanding how they work.

Use the tools available to you

Property buyers have never been so informed. These days a quick postcode search on Zoopla can bring up information on the estimated price and sales history of every house within it. This is crucial in helping you to spot undervalued properties that have great growth potential, or work out the potential of renovation projects and it’s free and easy to use.

Pick the right location

Location matters a lot when it comes to property. Even an average home can get a boost in value from being close to a high performing state school or by being well connected to local infrastructure, for example. University cities or towns – which have a strong rental demand – can provide a high yield for investors. Look out for forthcoming improvements in transport or leisure facilities, which can boost the appeal of a whole area. Many factors beyond the quality of the home itself come together to influence its suitability as an investment.

Buy to let or buy to sell?

You can either buy up properties to rent out or look to renovate them and sell them on for a profit. Or, of course, you can do both. This probably depends on the individual property and the rental yield you can expect. Before you buy any property, make sure you know how to use it best to maximise your money.

Start small and build up your portfolio

It’s advisable to start off slowly and build up your portfolio over time to avoid over-exposing yourself financially. Over time you’ll get a good feel for what does and doesn’t make a good bricks and mortar investment. You might even wish to team up with others to make a more formal ‘business’ of your property empire. Have a medium-to-long-term goal in mind as fluctuations in the market might well mean you have to cling on to a property before cashing in.

Be aware of the costs

You need to know about the extra costs involved in the purchase, management and sale of a property. Estate agents will typically take about ten per cent of your rental income to manage a property on your behalf, yet this might well be well worth it to save you any hassle on a day-to-day basis. Remember, too, that Stamp Duty has now risen, with those buying second homes paying three per cent more from April 1. Money made from selling such properties is liable to Capital Gains Tax at 28% - having been exempt from a recent Government tax cut – and the ability to offset mortgage interest payments against your tax bill are to be phased out. These measures shouldn’t put you off, but you need to factor them in so you don’t face any nasty surprises.

So, there you go. You might not be sticking up a hotel in Park Lane any time soon, but you’ll be making more than mere Monopoly money if you can heed this advice.