How Much Do You Need to Invest in Property? UpperKey Analyses

Options and ideas into financing a property investment

There’s more than one way to skin a cat—and there’s also a range of different methods for investors to break into the property market. In the first part of this guide, we look at considerations to be aware of when entering an investment market. In the second part, we’ll suggest the ways you can go about accruing the money that you’re going to need.

Typical expenses when investing in property

It takes thorough planning and a tight budget to know exactly how you’re going to gather the money needed for a deposit or to buy a property outright. What you also need to be prepared for is factoring in all associated costs. You’ll need funds to pay solicitors, estate agent costs, Land Registry fees, surveys, mortgage charges, Stamp Duty, insurance and more. If you’re creating a budget for your property plan, then you must be extremely thorough. The smallest overlooked item could make enough of an impact to stop you dead in your tracks.

Is property investment a realistic goal?

You should have a clear idea of what you can afford to spend each month, but you need to verify those numbers to be certain. Drawing up an all-inclusive budget is paramount. Again, it’s easy to overlook any item that could leave you short for just one month of the year; but one from which you would struggle to recover. Your budget needs to include every last item that could take you by surprise.

How Much Do You Need to Invest in Property? UpperKey Analyses
How Much Do You Need to Invest in Property? UpperKey Analyses

How to invest in property

There are several ways to invest in the property market. If you’ve got the capital, then the standard approach is to buy a residential or commercial property and become a landlord. How you choose to operate as a landlord is another question altogether.

If you aren’t in such a fortunate position, there are investment trusts that allow you to channel your funding directly and solely into the property market. It’s not quite the same as owning and managing a property, but it’s a starting point to get you involved in the industry.

There are many ways to make a break into the market. We’re going to look at a few, and the types of investment you'd need to make.

Buy-to-let investment

Buying a property and becoming a landlord is the most obvious option for anyone considering entering the market. A buy-to-let can offer a high return on an outright purchase, but that means having the total funding for the initial acquisition.

A buy-to-let mortgage offers the same long-term investment, a steady income stream and will pay for itself when the rental income is greater than the mortgage repayments.

However, a buy-to-let mortgage is typically more expensive than a residential option. Despite buy-to-let rates being the lowest for quite some time, investors should carefully examine all associated fees. Many low-rate options feature excessively high set-up fees, creating a false first impression of how attractive they are.

However, you need to consider the repercussions of an empty property over any given period. What about damage? Maintenance? Dealing with bad tenants or squatters? They all require additional investment to get you through those times of trouble.

Property development

Property development has a range of pros and cons. The money you’re going to need can cover the full range from highest to lowest. It all depends on what property you choose, its location, and what kind of state it’s in. Property development offers a quick return for investors looking to resell, or a longer-term option when developing a rental property. A development takes time and effort. If you can’t be there to take care of this yourself, you need to incorporate the expense of paying someone else to manage the process for you.

Unexpected expenses will always take you by surprise, so make contingency plans. Ultimately, every investment holds its own element of risk. Be prepared for those worst-case scenarios. You could make a loss, even with the best-laid plans.

Investing in property abroad

The beauty of investing abroad is that you will always have a year-round holiday destination at your disposal that not only feels like home—it is! The advantages? You get to choose your favourite location, and you can charge higher rental rates as a holiday or short-term let; both are significant pluses. However, 2 mortgages can create problems. There are maintenance costs to consider. And as always, the property needs a steady stream of guests to make it a viable financial option. We’re experts in this market, so we have a wealth of information into investing in foreign properties and how to make a solid return on your investment.

Our guaranteed rent program is ideal for new investors, minimising risk and simplifying your budget. We’ll happily talk you through the process and the multitude of advantages when you choose UpperKey to manage your property for you.

How much can you afford to spend on your property investment?

Your first job is to dig as deep as you dare; to find out how much money you have available.

It’s time to cash in savings, bonds, shares and anything else you can lay your hands on. You’ll need a considerable sum to buy outright or use as a deposit on a mortgage. On the flip side of the coin, you‘ll want to achieve the best property available for the money you have, as well as covering the many legal expenses.

How much can you afford to borrow?

Deposit ready, you can look into how much the banks will be willing to lend.

For different properties, you’ll need to work out the loan to value rate, and then use the lender’s calculators to see what the repayments would amount to each month.

If the figures match up to your budget, it’s all systems go!

How to invest in property with no money

If you’ve carried out your calculations and the money you have available won’t stretch to even the most basic investment, then you still have options.

Make your mortgage pay

If you don’t have the capital to take a traditional mortgage route, is there a way to obtain the deposit and borrow the extra on your mortgage to repay it straight away? Could parents, family or outside investors be the answer? Perhaps someone you know is open to making a small profit or helping you achieve your goals? A microloan could help you get on the ladder, so too could investment from peer to peer lenders.

How to buy an investment property with a partner

You could make a perfect team if you’ve got the skills and practical abilities to run the show, and a partner has the money to help make it happen. The split of funding and profit will have to be decided between partners on a case-to-case basis. Don’t forget to include options to renegotiate when the profits start to roll in. You might be happy with a lesser share initially, but many would like to reconsider a 50:50 split when the timing and finances allow.

Making a profit from your property investment

The ultimate reason for property investment is to make money. There are many pitfalls to be wary of, and many prime reasons to take the plunge. Anyone considering taking the plunge needs to explore every aspect of how to invest in property—UK or Europe—thoroughly, to make sure they understand precisely what they’re getting into.