The 5 Fundamentals Of Buy To Let Property Investing!
There are five fundamentals of buy-to-let property investment that are the basics in property investing and should be practiced by all who want to succeed in this field.
If you’re interested in buying a property in renting out, you need to follow these fundamental steps.
Invest In Trending Properties
The number one tip is if you're buying a property, you want to buy it in an area that's trending; that's going to give you expected capital appreciation.
Most people do buy-to-let investment wrong because they analyze an area going up in value, and they immediately invest in it. After a while, when the property's value goes down, they panic because they believe they have lost their money, and they sell that property.
That’s what you shouldn’t be doing.
See, after an expansion comes a recession, and after a recession comes expansion, and the cycle continues. So, I want you to do the opposite of what your intuition may tell you to do.
I want you to analyze an area and the price of a property that has been going down for a while. When it seems like it isn't going to go down any further, you buy it and rent it out.
I'm not suggesting that you buy properties that are in dive dumps in all areas, which is why we're going to get on some of the other points. I'm not suggesting you buy cheap properties. The return on investment needs to work out too. What I am saying is, don't get carried away when the market is going up a bit; it is not going to go up and up and up forever. It won't if it's gone up a lot in the last five years. It's probably going to drop them there to correct itself. If it's gone down and it's bottomed out, it is probably going to go up.
The Property Gives You A High Return On Investment
Capital appreciation won't pay your bills. What pays bills is the return on investment.
When a property goes up in value, it's fantastic. However, you won't be able to bank on that. What you can bank on is cash flow. You want to make sure that the property you're buying is giving you money every month. It is not an asset if it's not putting money in your back pocket every single month. Therefore, you want to figure out how much rent that property is going to generate—what return on investment you’re going to get. The return on investment is the amount of money that you personally had to put down.
So that's the deposit. That's the legal fees.
Whatever you personally had to put down and then you need to calculate how much monthly profit you are going to be getting.
What's the monthly rent – management – maintenance and voids – the mortgage payments the 3M s Management mortgage maintenance, what is the rent? Those three things that's going to give you your gross profit, your pre-tax profit times by 12, that's your annual profit. Divide that by the total amount you put down, and that is a return on investment, and that figure you should be aiming to get 20% or higher.
Always Buy Below Market Value
The great thing about property is that you can buy the stock below market value, and there's lots of stuff.
There are lots of Investments like gold and Bitcoin, and the price is the price.
Now with a property, the great thing is that's not the case. The price is what someone's prepared to pay for it, and the price is what someone's prepared to sell it for.
So in a property, you want to find motivated sellers; you want to find people that have to sell quickly and then you want to get the best possible price you want to get a bargain.
So find properties that are already bottomed out. So the market value is low, that is going to cash flow high and then buy them even lower, negotiate the price down and the way you do that is you do that by asking the question. Ask the question before you even view a property, don't go and view 20 properties and just put in a cheeky offer before you even ask the question.
What's the seller's situation? You know, I'm an investor so I don't want to offend anybody but I'm only likely to be able to offer around about 80% of the market value.
Is it worth me booking your viewing or not?
Focus On Formulas Not Feelings
Another important tip I want to give you today is not to get emotionally involved when buying a property. Often, we are emotionally attached to a property, we imagine ourselves moving into our investment one day, and we feel good about it. And then what happens? Its price goes down, and we are faced with losses.
I want you to invest in properties according to your formulas, not feelings. Analyze the market and the property, see if it would give you a good return on investments in the upcoming years, and then invest in that.
Get A Good Power Team
Lastly, you need to have a good power team. What I mean by a power team is you need a good solicitor, a good accountant, a good mortgage broker to get you the best rates. You need a good estate agent to sell you the deal in the first place and you need a good letting agent is going to manage the property and make sure that this is a passive income as opposed to a headache you can have a hundred houses and it's unless you've got it systemized probably it's just going to be a hundred headaches. Therefore, work on relationships.
I always say a good relationship is actually better than a good deal. So my advice to you if you're thinking about getting into buy to let is find other property investors that are doing buy-to-let Network go to networking events. Go to training seminars and meet people, meet estate agents, ask around, get referrals and build your power team. This is a business. This is not a hobby where you just happen to own a second home. If you do that, you're going to get a hobby like income. If you treat this seriously as a business and build your power team and equip yourself and educate yourself.
Conclusion
These are the five fundamentals of investing in a buy-to-let property. I hope you find value in these tips and invest in good properties that get you a high return-on-investment.
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