As additional taxation on pension assets continues to hit home many people are now looking towards property investment as their “pension fund of the future”. This has prompted an array of comments and suggestions to first-time property investors about how they can invest for the future. It can be tempting to make property investment complicated, high risk and long-winded, but at the end of the day there are just a handful of factors you need to take into consideration.
Do not overextend your finances
Even if you find the right property at the right price it can still go horribly wrong if you overextend your finances. You need to ensure there is a buffer between finance costs and your individual financial strength because at some point there will be unexpected investment required and things can go wrong. It is vital that one bad investment (or slow developing investment) does not bring down your whole portfolio. Keep it focused, know your boundaries and even if the best deal in the world is placed in front of you, always bear in mind your underlying financial strength.
Research, research, research
If you are starting your property investment career with very little in the way of knowledge about property then you need to do as much general research as possible. Look at how markets move, what moves markets and traditional valuation methods. It is also vital that you review news releases relating to property/economies although remember all news is open to interpretation therefore in reality there is no right and no wrong conclusion. Once you have a general understanding of the underlying market you can then focus on individual elements, such as buy to let, and increase your research and knowledge in these areas prior to investing.
It is never wrong to take a profit
If you work on the proviso that you will never sell at the top and you will never buy at the bottom of the property market this will put everything into perspective. There will never be a wrong time to take profit because at the end of the day you can only deal on the price at that moment with no certainty whatsoever about the future. Conversely, you will also need to learn how to take a loss which can perhaps be a little more difficult than taking a profit but is still a vital part of your education in the world of property investment. One bad apple can have a material impact upon your overall property portfolio and impact your finances.
Structuring your finances
Hopefully, as your property investment career progresses, you will receive rental income and bank significant profits going forward. It is therefore vital that you structure your finances and your property investments in such a way as to maximise tax allowances. In many ways this is a catch-up game between investors and the authorities but if you take professional financial advice with regards to your accounts there will likely be significant savings to be made. Those who ignore the structure of their finances and investments will likely feel it in their pockets in the long run.
Taxation allowances, different investment vehicles and professional financial advice are all out there – do not be afraid to use them.