If you have some money to spare, then you may consider whether to invest it. A popular way to invest these days is to buy a property and rent it out. If you have a large sum, you could buy something outright and if you have a smaller amount, you could put it towards a property and get a buy to let mortgage for the rest. There are advantages and disadvantages of investing in a property and it is good to think about them before going ahead.
Having rental payments will provide you with a passive income. You will not need to work for this income it will just come in each month which will be rather nice. However, it will not be completely passive. You will need to get involved to some extent. When your tenants move out, you will need to find new ones. You may have a letting agent who will do this for you, but they will need to be paid. They may arrange the advertising of the property and then the credit checks of the prospective tenants and they may organise the safety checks and any decorating work that needs to be done as well as the collection and payment of deposits. However, you may prefer to do some of this yourself in order to save money, but it will mean that you will have more to do.
In order to make money from your property you will need to find tenants. It is not always easy to do this, depending on the type of property and the location and so you will need to think about what you are buying and try to imagine if there will be a demand for this type of property. It is worth imagining what type of tenants you think might want that particular property. For example, could it be a student house a family home, for a couple a singleton or whatever. It is worth considering who the house suits and whether you are likely to find anyone that will be interested in a property of that type in that area. It is important to make sure that you are confident that you will be able to cope if your property has no rental income for a while. If you have bought it outright, you will not have so many overheads, but if you have a mortgage on it, then you will need to make sure that you will be able to make those payments. This could mean that you will need to put together a savings account with some money in it to cover you for this type of situation.
Property prices will be a big influence on whether you should buy. It is worth realising that property prices will generally rise but this is not guaranteed. There will be individual properties that actually go down in value perhaps because the area becomes a less desirable place to live. This means that it is important for you to make sure that you are not thinking that you will be able to make money quickly by buying a property, renting it out for a few years and selling again. You will need to hold on to it for a significant period of time to make sure that you are going to make a profit when you do sell it. This is because not only may the value not go up much in the short term, or it could even fall, but you will have fees to pay when buying and selling and you will need to make sure that you can cover the cost of these. This is the same as any investment, you would expect to have to keep it for at least ten years to start to profit from it.
Capital Gains Tax
It is worth knowing that when you sell a property you will have to pay tax on it. This is not on the whole of the money you get from selling but on the increase in value. Therefore, you will need to make sure that you are aware of this and that you take this off when you are calculating how much you might make when you sell. Remember there will be other costs when selling too, such as solicitors and estate agents so you will need to factor those in as well and make sure that you will make enough to make it worth selling.
There is a lot to consider when thinking about property investing. There could be a lot more costs than you have allowed for and it can take time to start making money. It is therefore worth doing a lot of research before you go ahead and buy a property.