So what is the best Investment strategy?
Of course, it depends entirely on your goals, financial position, appetite for risk, supply and demand of the areas you are able to work in etc…
However, for us as seasoned property investors we would like to explain Why we invest in the areas we do the way we do not just for us, but also for many of our clients!
Now this is limited solely to BTL (buy to let) and things can change for other types of assets. As an investment, when you put your money into something you want a return. Right?
So what is the key criteria you should be seeking when purchasing BTL’S.
- You need to ensure your BTL investment cash flows positive. This basically means that when you take into account your voids, management costs, mortgage payments, landlord insurance and ad hoc bills your rental income leaves you with some profit!
- You need to ensure it has the right tenant profile for you. (Students/Nurses/Doctors/Professionals etc) Try to think ahead about what kind of people you want to manage.
- You need to make sure that you can stress test this should interest rates rise. If interest rates beyond the current rate, can your property still provide a positive cash flow as per point 1? Now the final point of this post is the most important….
- You need to find the sweet spot in terms of buying the best value BTL! So what is the sweet spot? This is something we believe we have in our area. We benefit from some capital growth but also enjoy great cash-low. It’s where you put your money in the best situation for your needs.
Example: If you buy a £1,000,000 house, which has a mortgage OF £1,750 and your rent £2,000 barely covers that, its not a great cash flowing property.
Plus you would need an initial investment of £250k deposit + stamp duty + fees! However, if you used that £250k for example and got 10 houses at £100k, (£25k deposit per house) your mortgage could be around £200 and rent around £550/650.
This would give you on average a net of around £2500pcm! This cash flow is therefore clear to see + you now have 10 assets! Now, if cash flow wasn’t an issue for you initially, some could argue that investing in a £1,000,000 in a great area could see house prices dramatically increase and give you more £££ in your back pocket through capital growth! This is absolutely possible.
But if its not a long term objective of yours and you want to start to benefit from the get go, then spreading your money will serve your best! Besides, capital growth is likely in most areas, especially where we invest and over time, 10, 15, 20 years you will not just have 1 house go up in value.
You could have 10!
Now some areas further up north offer lower purchase prices, but the problem you may find is the capital growth is slow.
Similarly, some areas down south may actually give you the capital growth, but as an investor cash-flow should be king.
As an investment, it depends, but spreading your money over 10 assets for example in proportion to your investment we definitely believe this area is a great choice!
Feel free to get in touch, if your interested in working with us. We are here to serve and to help our investors build wealth!