The Amateur Financier

(Hello.  Once again, I have the pleasure of sharing a guest post with all of you, this time focusing on one of the most commonly recommended investments you’ll come across: real estate!  There’s lots of perils in that sort of investment, and it’s always good to be prepared for what could happen.  The following sponsored post sheds some light on a few of those risks, warning about what you should do before finalizing a real estate investment.  The post is directed at Brits, but the lessons are pretty easily applied to any real estate market.)

If you’re new to the world of property investment and you are looking to buy with a view to becoming a landlord, then congratulations – you’re at the start of an adventure that should prove to be a great source of income. That said, however, it’s vital that you take stock of the risks and pitfalls that could put a spanner in the works if you’re not careful.

The UK buy-to-let market has remained strong throughout the recession, with both new and experienced landlords taking advantage of a slump in property prices to snap up houses in popular areas of towns and cities around the country, with a view to renting them out to tenants.

Image courtesy of the approximate photographer

However, the growth in the numbers of UK landlords has not been without its problems and more than a few fierce critics. Many people have rushed into life as a landlord without considering the full implications of what a difficult, challenging job it can be. And if you’re foolish enough to think otherwise, your tenants will not be slow to recognise your shortcomings – and tell all their friends about their experiences of renting with you.

Buy local

Anyone who has rented a property from an out-of-town landlord will know that the distance between a property and its owner can be a sticking point in any tenancy. Keep in mind that your tenants could potentially be calling upon your services at any time of day or night, asking you to deal with common problems like broken boilers, electrical faults or leaks. Make sure you’re within reach by investing in property within half an hour’s drive of your own home.

Read the survey

Before you buy any home, you’ll be required to have a thorough survey carried out. This will involve an assessment of the building’s condition and surroundings, and could reveal problems with the structural state of your potential investment. While minor cosmetic issues can usually be fixed relatively cheaply, be aware of the implications of issues such as damp and subsidence. A house that has a damp problem could cost you a lot of money over a long period of time, so factor that expense into your plans before you buy the house.

Assess flood risks

If you view your potential property purchase on a balmy summer’s day, be careful. That idyllic little hub of peace and tranquillity you fall in love could turn into something quite different in the depths of winter. Be sure to do as much research as you can regarding the history of weather damage to houses in the area, paying particular attention to any flooding problems or roof damage caused by strong winds. These aren’t pleasant issues to have to deal with six months into the ownership of a new property, and apart from the hassle, can be seriously costly.

Estimate insurance costs

The advent of price comparison websites has made it easy for homebuyers to find out what their buildings and contents insurance costs will be, even before they have completed the purchase of a property. Tools like the moneysupermarket home contents insurance calculator can tell you what you’re likely to pay for your premiums based on just a few bits of basic information about the property you’re looking to buy.

Research local crime rates

Use government crime statistics and police websites to research the history of crime in the area you’re looking to purchase a property. Areas that have been less affected by break-ins, vandalism and theft will not only be safer for you and your tenants but they will also give you access to lower insurance premiums.

Meet the neighbours

Perhaps the most useful source of information when buying a property is the neighbours. The people already living in the area you’re looking to buy will be able to give you the most accurate information about the actual experience of living there. By meeting a few of the neighbours, you will be able to build up a picture of the quality of life in that area and draw conclusions as to how easy it might be to rent out a property in the area.