Property Investment as an asset class can, as part of a balanced portfolio, bring solid long term returns.
Below we have noted some of the reasons why we consider property investment, and for that matter renting properties in Ayrshire can offer inflation beating long term returns.
These rules can be applied to buy to let investment in many areas in the UK. however, what we have found that Ayrshire in facts ticks many of our golden rules.
- Golden Rule #1 - Buy in an area of strong rental demand
We keep hearing that investors want to purchase properties at a discount. Whilst it makes sense to purchase an asset under market price, the number one golden rule in our opinion is strong rental demand.
It can make no sense at all to secure a flat with a £15,000 discount if it cannot be rented for love nor money.
- Golden Rule #2 - Buy for cashflow - not capital appreciation
With this information you can then purchase properties that match your cashflow requirements.
For example if your strategy is to secure properties that cashflow over £200 pcm after all costs then this strategy surely will stand the test of time.
The inherent risk is greatly increased when individuals purchase properties, focusing purely on capital appreciation at the expense of income.
- Golden Rule #3 - Set aside an Emergency Fund
For example if you use all of your capital to purchase the property and then experience problems – like new boiler required, leaking roof, re-wiring then this is potentially putting you under financial pressures. It is much better to have reserves and secure a lower value or cheaper property.
- Golden Rule #4 - Buy Property At A Discount
They say in property, “you make your money when you buy, not when you sell!”.
If you can purchase the property under market price, then you have built in some degree of protection which can then help protect you from sharp market fluctuations.
- Golden Rule #5 - Invest For The Long Term
Property as an asset class is not a liquid asset, therefore ideally one should consider holding it for the medium to long term – 5-10 years or more.
During this period one is likely to secure reasonable capital growth and witness increasing rents year on year.