Peninsular Property

Property Investment Guide for Beginners

investing in property for beginners

Table of Contents

Investing in property for beginners is a powerful way to build long-term wealth, with real estate historically providing a strong return on investment. In fact, since last year alone, there has been an increase in property value of 0.4% in the UK

With past trends indicating prices will keep rising, as shown in the figure below, there is no better time to start investing in property than the present. However, if you’re a complete novice to property investment, getting started may seem confusing.

At Peninsular Property, we recognise this and have put together a property investment guide for beginners to help you learn how to invest in property as a beginner and why it’s a smart financial move. Keep reading to find out more!

 

Figure 1: The average property price over the last decade

Learn the Basics of Property Investment

Unlike stock market investments, there is a lot of information you’ll need to learn when getting started with investment property. So, let’s start with understanding the different types of investment properties that you can choose from and why investment property is a popular investment option.

 

Why Is Property Investing a Good Idea?

Property has historically been a stable and reliable long-term investment option. It offers potential benefits such as rental income, property value appreciation, and tax advantages.

However, it’s essential to consider market conditions, location, expenses, and financial goals before making investment decisions. Real estate investors are typically interested in property due to the potential for:

  • High cash flow
  • Capital growth returns
  • Tax benefits
  • Capital appreciation
  • Diversification of portfolio
  • A chance to build wealth
  • A solid retirement option
  • The protection from inflation
  • Multiple streams of return

 

The Different Types of Properties To Invest In

When investing in property, options include residential property like single-family homes, apartments, and condos, as well as commercial real estate such as office spaces, retail units, and industrial buildings. Each type offers unique benefits and risks, so you should make sure that your choice aligns with your investment goals and risk tolerance.

 

Steps to Invest in Property

As a property investment beginner, you may be in one of two situations:

Situation 1 – You have minimal property knowledge and you’re still learning.

Situation 2 – You have a lot of property knowledge but are unsure where to start.

Regardless of your situation, we have you covered. Keep on reading to learn more about the steps you will need to take to make a well-informed real estate investment decision.

Step 1) Decide on Your Investment Location

The first step to investing in property is to choose a location with a high rental demand, as this will ensure a consistent income. Usually, areas close to schools, shops and public transport links are popular with tenants.

To make sure it’s a great investment, you should compare various house prices to determine potential rental income. This will help you to understand what you could realistically charge for rent and whether it will be worth it based on the cost of the house.

 

Step 2) Choose Your Target Tenant

When renting out your property, finding appropriate tenants is very important, as it can save you costs in the long term. When determining your ideal tenant, consider factors like property type, location, and rental demand, as these factors will attract different types of tenants.

For example, families may prefer houses near schools, while young professionals might seek apartments close to work or nightlife. By having an idea of your ideal tenant, you’ll be able to plan your marketing strategy to attract reliable and long-term renters.

 

Step 3) Make Sure Rental Returns Are Competitive

To ensure a rental property can generate a competitive passive income, you should analyse the local property market before buying. To do this, research similar properties in the area and compare the rental prices. This will give you an idea of what you can charge for monthly rent and whether it’s profitable.

Step 4) Add Value to Increase Potential Profit

To boost potential profit, consider ways to add value to your property, such as renovating the kitchen, updating bathrooms, or improving curb appeal. These upgrades can justify higher rent and attract quality tenants with a higher budget.

 

Step 5) Know Your Exit Strategy

An exit strategy in property investment is a plan for withdrawing, such as selling your property for profit, converting it into a long-term rental, or reinvesting in another venture.

As with all investments, understanding how you will exist when the time comes will help you to be prepared and more confident in your current decisions. So, plan your future strategically to maximise profits or minimise losses.

 

Decide Your Investment Option

There are direct and indirect property options to choose from, as shown in the table below:

Direct Ways to Invest in Property Indirect Ways to Invest in Property
Buy-To-Let Mortgage Property ISAs
Property Development Real Estate Investment Trusts (REITs)
Buying a Property Abroad Peer-to-Peer Lending
House Flipping Crowdfunding
Land Banking Schemes Property Funds
Buy Land and Build Mutual Funds
Invest in Rental Properties Property Bonds
Listed Property Companies Closed-End Investment Companies
Property Unit Trusts

 

Understand What Rental Property Involves

To explain rental property simply, it’s the act of renting out a purchased property to tenants. By doing this, you can generate a rental income that covers expenses and potentially provides profit and capital gains.

Property investors are often drawn to rental property due to its potential for consistent monthly rental income, as this can provide a stable cash flow of passive income that requires minimal effort. However, this is not always the case (read the next section to find out why).

For real estate investors, it’s essential to fully understand the UK property market and current property prices to make smart property investments. To manage the potential returns of your real estate investments, you must purchase a property at the right price while also effectively managing it to maximise returns.

Property management tasks can include handling tenant issues, making sure the property is well-maintained, and covering ongoing expenses like mortgage payments and maintenance costs.

Property Investment Risks and How to Manage Them

Here are some potential property risks that you should consider before investing in property.

  • Liquidity
  • Problematic tenants
  • High entry costs
  • Property maintenance
  • Mortgage interest payments and rates
  • Property management costs
  • Unpredictable real estate market
  • Property taxes

 

But is it possible to avoid these risks? While it’s impossible to avoid these risks, there are ways to help you overcome them, which will come in handy if you’re new to real estate investing or have some experience.

 

Tips to Overcome Liquidity

An asset’s liquidity refers to how quickly it can be converted to cash without losing value. To manage this, keep an emergency fund and diversify into more liquid assets while regularly aligning your investment strategy with your liquidity needs.

 

Tips to Overcome Problematic Tenants

Troublesome tenants can lead to disagreements, damaged property, and late payments. Use a clear, detailed renting agreement and verify references and credit histories of potential tenants to prevent this. To address tenant concerns and lower risk, think about working with a property management company.

 

Tips to Overcome High Entry Costs

High entry costs in property investment include down payments, closing fees, and transaction costs. To address these, look into financing options, look for houses at a lower price, practice frugal saving and take into account first-time investor programmes. It’s also a great idea to target areas with strong house price growth to help offset these initial expenses.

 

Tips to Overcome Property Maintenance

Property maintenance involves keeping a rental property in good condition by addressing repairs, regular upkeep, and tenant needs. It is vital for preserving property value, keeping tenants satisfied, and avoiding any costly issues like an unleft leakage.

Managing multiple properties can be time-consuming, but hiring a property manager can be a great help. Not only will doing this ensure that your property is being efficiently managed, but it will also free up your time, both physically and mentally, to give other areas of your life attention.

 

Build Your Investment Portfolio With Peninsular Property

Although purchasing property can involve a lot of steps, it is still an achievable investment option for those without any prior experience. By considering the information highlighted in this blog, you’ll be prepared to start your property investment journey with confidence.

If you’re already an experienced property investor who is looking to expand your assets even further, you may benefit from our property management services. Property investing can be a time-consuming venture, but with our help, you’ll have less stress and more personal time.

With three decades of experience within the sector, you can rely on our team at Peninsular Property to carefully handle your investments and strategically advise you with your property-related decisions. Contact our friendly team today at +44 7501 928060 or complete our contact form to explore your investment options today.

Share On Socials:

Compare Listings

Title Price Status Type Area Purpose Bedrooms Bathrooms