Why Low Risk Investors Enjoy Longevity In The Property Market
After the global financial crisis, many have learnt about property cycles the hard way. As a result, more and more people are now looking into low-risk investing.
While it’s true that property investment can be a low, medium or high risk investment opportunity, what separates low risk investors from the rest is their ability to be prepared for any downward movement in the property cycle.
So if you want to ready for the peaks and valleys, consider applying these tips in building your property portfolio:
Wait for the right property
BMV properties are ideal for buy to let investment. Hence, I’m always on the lookout for BMVs. This doesn’t mean, however, that I’ll buy any and all BMV properties I can get my hands on. I still pass on properties which are found in unfriendly neighbourhoods and those which are damaged beyond repair. Waiting for the right property has big rewards, because this means you can still resell the property after.
Always pay a large deposit
If you’re planning to buy investment property through a mortgage, there are big benefits to reap when you pay a large deposit fee.
A larger deposit means that there’s higher equity in your property. This comes in handy when the market takes a downward curve and there’s a big chance you won’t lose your property when you begin to miss one or two mortgage repayments.
Keep your tenants happy
Maintain a happy and positive environment for your tenants at all times. Don’t give them a reason to leave your buy to let property; otherwise you’ll have a hard time making a profit from your investment. Remember that regular cash flow is critical; and without regular tenants, keeping a regular cash flow is almost impossible to achieve.
I try to keep my long term tenants happy through keeping my rental rates 8% lower than the current rates, but I keep this secret treat only for long term tenants who have not caused any trouble with my properties.
Save as much money as you can
One of the biggest fallacies that some investors assume is that rental income is enough to cover other costs of running a buy-to-let property. That’s why they pour all their hard earned money into the purchase price of their buy-to-let property.
It’s about time to change this practice.
Part of a low-risk model of owning BTL property is keeping aside enough money to answer for everyday costs and even damages arising from unforeseen events. For example, last January, one of my tenants caused an accidental fire in the kitchen. Having emergency funds helped deal with the damage immediately while waiting for insurance to follow through.