We've all dreamt about it – getting the keys and finally walking into our very own property, personalising it just the way we want, and proudly declaring, "This is mine!"
But is investing in property a smart move? I used to receive this question from my clients all the time. Now people are asking whether we should take the leap, especially when interest rates are doing a dance routine. The fast moving nature of the property market, and the never ending decisions we have to make, whilst navigating through jargon and terminology nobody seems to be able to simplify, can leave us very apprehensive about investing our money. So trust me, you’re not alone.
Which is why I’m about to go through the seven essential steps everybody should consider before diving into property investment. Because the best way to climb the property ladder is one conscious step at a time.
Is buying my own property a good investment?
Making the decision to invest in property hinges on a trifecta of factors: your unique personal circumstances, your aspirations, and the ever-changing market conditions.
1. Personal circumstances
This means having a clear understanding of your current financial situation, your employment status, and your savings to determine what is achievable for you at that given time. Gaining financial clarity could be as simple as speaking to a qualified financial advisor or mortgage broker who can help you to understand the home buying journey from a financial perspective and explain to you the options available with the banks.
2. Your goals
Whether you're seeking financial security, a place to call home, or a source of rental income, your objectives will guide your property journey. It’s important to establish why you want to own your own property and where.
For example, if you want to own a property near your workplace but can’t currently afford the house prices in that area, then perhaps buying an investment property in an area you can afford in the meantime could be a great way to achieve both goals. You would be living in rented accommodation near your workplace, whilst owning an investment property in another area that is affordable to you and you receive a rental income from the tenants.
3. Market conditions
This can significantly impact your investment choices and results. Therefore, it's crucial to keep an eye on the property and economic climate. Be sure not to let your emotions get in the way of what may appear as a “sound investment” at first. If you had your heart set on a specific home but this home has proven to have more problems than it’s worth, then sometimes the perfect strategy is to let go.
With interest rates so high, should I take the plunge or wait?
Here's the scoop. When inflation's on the rise, letting your money sit idle in cash won't help it grow, and the stock market can be a wild ride. But property? That's a different story.
"The best way to climb the property ladder is one conscious step at a time"
The benefits of owning a property
Picture this: You walk into your own space, and you can do whatever you please – paint the walls purple, put up a disco ball, or even turn your living room into a yoga studio. It's your canvas, your kingdom, and your rules.
But wait, there's more! The perks of property ownership go way beyond interior design choices. It's a one-way ticket towards financial empowerment. Property values have this delightful habit of appreciating over time, acting as a secret nest egg that steadily grows while you live your best life. Say goodbye to those pesky rent hikes or landlords popping in unannounced.
And here's the icing on the cake: independence. You're the queen of your castle, making decisions without needing anyone's permission. Want to create a little side hustle by renting out a room? You can. Want to enjoy the fruits of your investment by generating rental income? You bet you can!
But let’s bring some balance to this palace of dreams. Owning property, while rewarding, brings financial responsibilities that can strain your budget with property taxes, maintenance costs, and unexpected repairs. Property's illiquidity can be a drawback when quick access to your investment is needed because your cash may be tied up in the property for a while. Additionally, property values don't always rise, and market fluctuations can lead to declines.
Work out the right balance for you but be prepared for the pros and cons of property investment and go into it with your eyes wide open.
7 steps to get you on the property ladder
To kickstart your property journey and home buying experience, let’s equip you with the seven steps which will take you towards property ownership.
1. Get clear on your goals
Before you even think about picking out curtains or browsing listings, take some quality time to ponder your property goals. What kind of property are you dreaming of? What's your budget? What does your ideal neighbourhood look like? Break it down into non-negotiables, nice-to-haves, and those whimsical dream features. This vision board is your north star as you embark on your property adventure.
2. Understand how mortgages work
They might not sound sexy, but they're just loans to help you claim your property kingdom. Three main types are usually available in terms of how you pay back your mortgage loan: fixed-rate, tracker, and variable-rate, are on the menu. Dive into the basics, get cozy with interest rates, and figure out which repayment strategy suits your lifestyle, goals, and budget.
3. Learn what is eligible to you
This is your golden ticket. Lenders will have their magnifying glass on your income, credit score, job status, and other financial gems when assessing your eligibility for a mortgage. What can you realistically afford? What mortgage options and products are out there for you? Make sure you're fully in the know.
The best place to start when it comes to steps 2 and 3, is to speak with a qualified mortgage advisor who can give you a clear breakdown of the industry as a whole. They can explain what the lenders and banks are looking for and how they can help you. Lean on the people who know best and are already equipped to inform and educate you on this subject.
4. Understand what help is available to you
Whether you're in the UK or elsewhere on the globe, there's a treasure trove of programs and incentives waiting for savvy property hunters like yourself. From government schemes to shared ownership, these goodies can be game-changers. Discover what incentives your country has to offer and surround yourself with people who know. A great place to start is your local news hub, estate agencies, and property agents. There you can find news and information relating to your area from property prices, to other helpful hints and tips about the property market and lending options.
5. Save for a deposit
Time to put your saving skills to the test! The bigger your deposit, the better your ticket to accessing the most desirable mortgage rates. You might need to bid farewell to some of those indulgences, tighten that budget belt, or even explore side hustles to turbocharge your savings game.
Doing this alone?
Saving for a deposit is the gateway to accessing suitable funding. You’ll need to be smart with your spending choices to ensure you not only live in the moment, but you also make a plan for the future.
Can you access help from your loved ones?
Oftentimes, a parent, relative, or guardian in your life will kindly and generously want to gift you some money to put towards your deposit to buy a home. This is a great way to bump up any money you are personally saved to try and meet your deposit goals.
Got inheritance funds you can use?
Perhaps you’re one of the fortunate ones who have come into some inheritance and are wondering what you can do with that lump sum cash. Before putting 100% of this into one single investment, speak to a financial advisor to discover how you can make your money work harder for you. Have a strategy and don’t put all your eggs in one basket.
6. Secure your job status
Stability is your best friend when it comes to lenders. They want to see that you have a reliable income source and can afford to make the mortgage repayments. So, make sure your job status is as solid as the foundation of your future home. It will play a pivotal role in your property journey.
However, don’t be put off if you are self-employed. Mortgages are still totally accessible to you too even if you are not in a “traditional job” and own your own business. Different lenders have different criteria which is why it is important to do your research. Don’t assume you aren’t able to get a mortgage until you know all the facts.
7. Seek help from professionals
No superhero navigates the property world alone and as mentioned many times, you need to be surrounded by experts. Seek out the professionals: mortgage brokers, financial wizards, solicitors, surveyors, and estate agents. These professionals will be your guiding stars, helping you navigate the labyrinth of property dealings with their expertise and know-how.
You’re already one step up on the property ladder
Now, armed with these seven trusty steps, you're well on your way to conquering the property ladder with a sense of purpose, confidence, and intention. The rest is up to you and nobody can ever truly be ready until you just start. Trust me, there will be a lot of learning along the way. Whilst you can do plenty of research and learning before you start, you will never truly gain the experience and knowledge that comes from actually doing it.