Thinking of investing in property?
If you’ve managed to squirrel a little bit away over the years or you’ve come into some money, then at one time or another someone has probably suggested you invest in property. With savings accounts and many other traditionally reliable investment strategies now providing negligible returns, property investment remains a continuingly attractive option in Ireland – people always need places to live.
But if you’re a first-time investor, taking the initial steps can seem overwhelming. Where do you start? Our easy, four-step guide will set you off on the right track.
1. Do your prep
Ensure you have your finances straight and understand exactly how much you’ve got to spend.
One of your key questions from the outset is, “How do I hope to get a return on my investment?” There are two main strategies in property investing: capital growth and rental yield. Ideally you want to be able to work both, but that will depend on your investment goals and the prevailing economic situation.
Capital growth means buying a property with the intention of letting it appreciate over time so that you make a profit on its eventual resale. So that's the long-term goal sorted out. In the meantime you want to make sure you earn a decent, consistent rental yield from the property.
You can work out your anticipated rental yield like this:
Annual rental divided by the Purchase price multiplied by 100 gives you your Rental yield.
€8,000 ÷ €100,000 x 100 = 8%
Once you start to investigate rental yields, make sure you’re clear on the options in front of you. For instance, are you being shown the gross yield – before bills and expenditure – or net yield where these costs have been accounted for?
If you haven’t got the full capital required, you’ll need a specific buy-to-let mortgage, so find out how much a mortgage lender is willing to offer you. All lenders will want to see your sums and make sure that your rental income will more than cover your monthly mortgage repayments.
2. Get sound advice
Get the right advice before doing anything, preferably from an experienced property investor who has been in property investment for several years. That way, you’ll be getting advice from an expert who understands the demands (and pitfalls) of the current market. They can give you the relevant information on the different property investment strategies such as Buy-to-Let, Buy-to-Flip and a whole host of other options available to you.
3. Decide how involved you want to be
If you have time and you want to be more hands-on, then you need to be prepared to do plenty of research to find the right property for your investment strategy. You’ll need to make sure you have a good grasp of the market you’re interested in. You won’t necessarily be investing in the same neighbourhood you live in – even streets a mile or two away can have nuances that you’re not aware of. It pays to track the historical arc of house prices and average rent prices in the area to be certain you’re getting a fair deal that will recoup your investment. Make use of resources like Daft.ie which have a host of valuable data available to mine.
Ask yourself questions about the type of property you’re looking for and where, bearing in mind your finances:
- Over what timescales do you hope to profit from your investment?
- Who would want to live in this rented property?
- Is that the right market for the area?
- Does the property need any money spent on it before you can let it?
- How often has it been on the market?
- Are there any other costs you need to be aware of?
- What local services and amenities are available?
- What do those living nearby think about the area?
- Is there any local regeneration work in the pipeline?
Be clear about what you’re taking on before you agree to do so.
4. Finding the right help
Lastly, if you are going it alone, once you’ve bought the right property, I strongly recommend that you don’t try to manage it yourself, especially as a first-time investor. Find a good management agent to manage the day-to-day running of your property. While there’s a cost involved in doing so, there are several ways in which that cost is repaid to you.
For one thing, with the resources and reach of a respected agency you’re more likely to find tenants faster, both at the outset and when tenancies end. They’ll have a clear understanding of how much rent you can charge so you know you’re maximising your yields and, because they’re used to thoroughly screening tenants before offering them a property to live in, you’ll be reducing your risks too. Add to that the time and mental effort you’ll save from not having to handle many legal requirements, tenants’ questions and routine maintenance and you’ll think of a good agency in terms of what they’ve saved you rather than what they’ve cost.
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