To some of us, property is simply a necessity. But to others, it’s a way to diversify investment portfolios and build wealth. It’s easy to see why real estate is attractive to investors too; while the property market experiences peaks and troughs, it’s generally considered a safe, long-term investment. You only need to look to the past for proof of this. Take any 10-year period in history, and there’s a strong chance that property was worth more at the end of those 10 years than it was at the start.

If you’ve got some spare cash and you’re looking to make some money via the property market, it can be overwhelming trying to get started as a property investor. That’s why we’ve put together a step-by-step guide to take you from knowing nothing to being a fully fledged landlord. 

Educate Yourself 

Like most things when it comes to making money, property investment begins with education. You can’t expect to just walk into this complex industry and start making money from day one without putting in the hard work beforehand. Fortunately, it’s never been easier to educate yourself about property and investing. To start with, there are various investment websites, articles and podcasts that are available for free that offer a great starting point. If you’re looking for something deeper, you could also turn to a paid course or attend events to connect with opinion leaders. Joining forums to connect with like-minded individuals is also another great option, regardless of how far along your journey you are.   

In the early days, try to get to grips with basic terminology such as yield, equity, depreciation and so on. From there, you can start to analyse local markets, past trends and so on.

Determine Goals & Budget 

One of the most overlooked areas of property investment is budgeting. Before you get started, you’ll need to set goals. While you may think that the goal is simply to make money, there are different ways to do so. For example, if you’re looking to make money quickly, flipping a property is probably the quickest route to profit. However, this does require having enough money to buy a property outright and also cover renovation costs. 

Most new property investors don’t have the funds to flip houses. So buying to let is a more common strategy. This is more of a long-term approach, and it may take years before you see a return on investment. On the flip side though, this is a great way to earn passive income, and it’s commonly regarded as a safer approach to property investing. 

A common mistake is not accounting for emergencies. As a landlord, many emergency costs can arise, and it’s your responsibility to cover them, including general maintenance of your properties. Make sure you put together an emergency fund before working out your budget.

Understand Financing Options

You don’t have to rely solely on your own savings to become a property investor. You can still take advantage of mortgages and private lenders, which will require an initial payment. For your first property, you could also explore joint ventures, which involve pooling your funds with other parties to share ownership of a property, but also share profits.  

As a general rule, the more money you borrow, the quicker you can expand your portfolio, but the more risk it involves. Make sure you are aware of all financing options before beginning your search for a property.

Find the Right Property 

Once you feel like you know enough, you’ve gathered your funds and planned a budget, it might be time to buy your first investment property. Start by identifying the right first property for your portfolio. This could be an apartment, an HMO or a full family home. But as you’ll probably understand by this point, there are many other factors to consider; location being arguably the most important. 

When choosing the right location for a property, consider what’s around the property. Transport links, schools and the local job market will all impact how desirable a property is. You’ll also want to research any future plans for the area. For example, if a new train station is about to be built, you can expect house prices to rise in the coming years.  

Finally, be patient. You’ll probably be eager to jump into the world of property investment, but it’s important that you wait for the right deal. Being too keen to buy your first property could lead to you overpaying, and this is the easiest way to lose money in the world of property investment.

Due Diligence

Once you think you’ve found the perfect property for your first investment, it’s important to carry out some thorough due diligence. You’ll want to begin with standard inspections to work out if anything needs to be repaired or upgraded. If this is something you’ll need assistance with, make sure it’s been factored into your budgeting.  

Conduct research around things like the local crime rate. A property may not be worth as much as you’d expect if it’s located in a bad area — a quick online desktop valuation can assist with this. While it can be tempting to get your offer in as quickly as possible, the more time you put into due diligence, the less likely you are to make a wrong decision.

Make an Offer

Once you’re absolutely sure that you’ve found the right property for your first investment, the fun can begin. You’ll first need to make an offer to the seller, which is commonly done through an agent. There are two important factors here: the first being your negotiation skills, and the second being your discipline to stick to a certain figure to ensure you don’t overpay.

It will also involve working alongside a conveyancer who’ll be responsible for handling paperwork and finalising the deal. It’s at this stage that unaccounted-for fees can arise. Again, this is why it’s so important that you consider absolutely everything when budgeting.

Manage Your Property 

You might think that once you own your property, you can simply rent it out and watch the money roll in. The harsh reality is that this is often where the hard work begins. You’ll first need to decide whether you want to manage the property yourself or hire a property manager. In most instances, first-time landlords are working to strict budgets, and a property manager isn’t financially viable. 

It’s also critical that you take your time when finding a tenant. While it’s impossible to know every tenant inside out, allowing someone to live in your property who doesn’t respect it will ultimately cost you money. 

It’s also your responsibility to maintain your property. While it might be tempting to cut costs by not upgrading your property, this is likely to increase costs in the long run.