For the first time in a long time the value of property investment is being challenged. Some experts are claiming that UK property is “overvalued” but it is not always a wise thing to follow the advice of the experts. While demand for property still exceeds supply then there is still good money to be made. And this demand figure is predicted to grow in the years ahead.
It is understandable that if you are just starting out in the property investment world that you can feel nervous about the conflicting information that is out there. After all, UK property does have an expensive feel to it. So a wise strategy to adopt is not to be reliant on rising property prices but to make an investment where sustainable profits can be made.
How to truly Evaluate Yield
You have a lot of choices when it comes to investment so how do you know if property will provide the best annual yield? Well you need to crunch the numbers properly to uncover the true yield. Let’s consider a property investment of £250,000:
- An initial deposit of £75,000 is made and a buy to let mortgage obtained for £175,000.
- Your monthly costs including the mortgage payments will be £1,200 each month
- The rental income you receive is £1,700 per month
- This means your net will be £500 per month or £6,000 per year
So your true yield will be (£6,000/£75,000) 8%. This is a good yield and will beat other forms of investment hands down. This type of property investment is called “investing for cash flow”.
Reducing your Risks when Investing for Cash Flow
One of the best ways to reduce risk is to find a good mortgage broker who can land the most attractive buy to let mortgage for you. You also need to adopt a strategy that ensures that you will find tenants quickly and also structure your investment deal so the tax liabilities are minimised.
Another important tip to reduce your risk is not to rely on history repeating itself. Just because property prices in the UK have doubled on average every 7-10 years does not mean that this will continue. Having said that, this rule has been consistent since the end of the Second World War.
You need to do your homework and not just rely on the yield numbers. There are a number of things that you can check to make certain that your property will stand the test of time. Transportation links, good schools, good employment in the area and local government investment are all signs of an area that has a future.
Make sure that you are fully up to speed with all of the latest developments in property investment. Get the right training and don’t be reluctant to obtain the right advice when you need it. Spend as much time online reading about property investment and take part in local meetings etc.
Trust Those that Know
At CPI we truly have our finger on the pulse of UK property investment. Through our “hands off” property investment partnerships we bring all of our experience to bear while you take a back seat and reap the rewards on your investments. Contact us here today for a free, no obligation discussion and find out more.