In some ways the very opposite of making money online would be to invest in bricks and mortar, and start a property development business, however, when you compare the two methods of making money there are some huge similarities, as in both cases, people are building assets they then leverage to create passive income.
In the case of the property developer, they are doing this by renting out their property whilst the blogger for instance, is renting out space on their website… in both cases, they are leveraging an asset to create income rather than trading their time for money in the linear way most employees do.
The best way to make money, of course, is to invest. A lot of people today are looking into cryptocurrency and concepts such as IHT Coin, which is relevant to real estate, yet an equal amount of people are a little timid about the prospect of all these “new” ways of making money and prefer something more traditional such as investing in property.
This article offers some give some general guidance for people thinking of dipping their toe into the idea of buying an investment property. It’ll help you think about where to find a property, what to buy, and who to rent it out to.
WHERE TO BUY
Many amateur property investors choose to head to an auction, thinking this might be the best place to grab a deal, and in some ways they are right – however, one must thoroughly look into the reason the property is being sold at auction rather than by a real estate agent.
It can be as simple and innocent as the bank that has foreclosed on the house has a policy to sell at a specific auction, and in these instances, that’s fine… but just be aware that some houses might be going through auction as the owner knows you won’t be able to do a full inspection of the property.
Furthermore, it can be very easy to get caught up in the psychology of the situation at an auction, where your bids can well exceed your budget for a particularly property as the bids almost hypnotically spiral upwards.
WHAT TO BUY
There are several factors to consider that will require significant research; such as crime rate, the quality and proximity of local schools, transport links, and social amenities.
If you are able to get your hands on some insider insight, such as from the local council, to understand what the next five years will bring to the area that would be helpful; for instance you would want to find out if a new sewage treatment was opening up in a few years time. The point is, to do your homework, as whilst it might feel onerous and perhaps even costly, it will definitely pay off in the long run.
On this point, you might want to consider purchasing in an area that you are already acquainted with rather than going in blind.
WHO TO RENT TO
The next question is why to rent to, and within this, there are three core markets: students, professionals and those on government benefits.
Now, the wonderful thing about students is that their parents will often act as guarantor and are often willing to pay up front for a whole semester, or even academic year, which means this can be a very financially reliable way forward.
That said, the downside, is that students can be messy, disrespectful and noisy to the point they could disrupt neighbours and not always look after your property very well.
For this reason, if you are buying a property with a view to renting it out to students – you’ll want to essentially buy a basic shell of a property that is fitted with relatively cheap carpet and furnishings that are all easy to replace.
The pros of professionals are that they are the most likely genre of people to keep the house tidy, conform to the rules, and pay their rent on time. That said, there are plenty of professional people that end up falling behind with rent, and interestingly enough a large portion of eviction action, in court, is pursued against professional people.
Whilst there are some social disadvantages to consider in terms of the reputation and stigma of this demographic, there are plenty of people in receipt of government benefits that will take good care of your property.
The main advantage when renting to someone on benefits is that you can set it up so the government pay you directly, meaning you are getting a reliable check in the mail from the government. This, therefore, makes renting out your property to people on benefits a surprisingly attractive and reliable option.