Am I Financially Ready To Invest In A Property?

Real estate is known as a stable and profitable asset which you can invest money into. Many successful businessmen have property investments on the side as a way to diversify assets and generate passive income.

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If you plan to claim your stake in this multi-trillion pound market, then you have to start with the first step – and it is not buying a property. It is determining that you are ready for it.

Here are some key pointers to help you decide if you are ready to invest in property.

You can afford downpayment and other fees

For obvious reasons, you would need to have a substantial amount readily available on hand once you are decided on your purchase. Keep in mind that there there is always a possibility of competition and you could miss the opportunity if you cannot produce a downpayment in time.

The amount you can afford for this will also be a factor to determine the type and size of property that you should buy since properties require different deposits.

Aside from the downpayment, you also need to be prepared for additional fees involved in the transaction. This can include conveyancing, mortgage, and broker fees.

Buying a house in the UK also involves a Stamp Duty Tax. However, you can be exempted if you are a first-time buyer.

Check our previous article about Property Taxes in the UK.

You should be free of debts

If you are currently paying off an existing debt, it would be best to first settle it before jumping into property investment. Having debt will certainly decrease your credit score, limiting your buying capacity.

Such liability will also strain your finances and can weigh you down in the long run. In an undertaking like this, it is best to start fresh.

You should have a stable & substantial income

Once you place your investment, you can only expect your funds to flow outwards. Aside from the monthly amortization, you will also be responsible for operating and maintaining the business. You should have a reliable, long-term income that can sustain these expenses.

Take note that your source of income will also be a significant factor when applying for bank funding.

You must be ready with an emergency fund

If you meet all the requirements mentioned so far, then you are looking to be in a good position to invest. However, even with all that, you cannot be fully prepared if you do not have an emergency backup fund.

One unforeseen event or an unaccounted expense can cost you dearly and send your investment crashing down on you. To protect oneself from this, a wise investor always has a safety net in the form of a savings account that is only popped open when direly needed.

As a rough guide, your emergency fund should cover at least three months’ worth of your usual expenses or more.

You have set your business plans for the property

How do you intend to utilize the property after you purchase it? In simple terms, an investment is an asset you acquire to generate more money for you. Therefore, you must have a business plan laid out for the property.

There are a number of property business strategies that you can go for such as Serviced Accommodation, Rent to Rent, or a Home Flipping project.

You received quality training and mentorship

The property investment business is not something you can simply learn from books or from watching Youtube videos. The best preparation is through the help of others who have experience in the field and have successfully built their wealth from thriving in the trade.

Finding a mentor who can help you in your journey will be a valuable advantage. In addition, growing your network and becoming part of a community of property investors will give you much-needed support.

Before You Go…

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Am I Financially Ready To Invest In A Property?