The property market is one of the best places to make an investment. The property itself, the land that it is built upon. The space. The location. What it was used for previously. All of these things will have an impact on the value.But you aren’t going to be living there. Instead, you will be looking for renting out the offices, retail for lease or buying to let. This is a long term investment that will keep money coming into your bank year on year.
Is It Right for Me?
- If you understand that there will be costs and time involved in running and owning the property – even though you don’t live there.
- Know that there are additional risks that will go along with taking a mortgage with the intention of renting out the property.
- Know that you might not make a profit for a few months after you have initially purchased the property – while you get it ready
- Rental prices can fluctuate, and you will need to be in keeping with the economic area pricing
- Your money will be tied up for a very long time
- You enjoy being able to put your hands on the bricks of a property.
How Does It Work?
Unlike a typical mortgage, you will need to either use your own cash or a buy-to-let mortgage, with a cash deposit. So it isn’t cheap in the early days. There are a few risks, if you need to sell the property, and you are going to make a loss, you will still be liable for the mortgage. Making up the difference will be your responsibility.
If your tenants leave, and you haven’t managed to rent to space out, you are going to make no money for the following months. But you will still need to make those mortgage payments.
You will be earning profit from two main ways:
- Capital Growth: the profit you would make if you sold the property for more than you purchased it
- Rental: this is what your tenant or tenants will pay in rent. You’ll need to minus any running costs or maintenance though.
Return and Risk
You can charge pretty much what you like in terms of rent, but you should be mindful not to price yourself out of the market by being a little bit too greedy. If you are unable to find tenants for some time, then you might not be able to cover the mortgage, unless you have other revenue streams (which is highly advisable).
If house prices begin to fall, this will impact your property too. You’ll need to decide if you can afford to hold on to it until a later date.
Any significant repairs on the building or home will be your responsibility.
It can be a highly profitable move for you to rent out a property, so only undertake it if you have a financial buffer to deal with any gaps in rental payments.