One of our most commonly asked questions is "how much money do I need to invest in property?" Investment Consultant, Michael Johns takes a look at the minimum budget as well as extra costs in addition to the property price. He also addresses the differences between buying with cash or a mortgage.
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Please see below the full transcript of the video:
Hi and welcome to Ask Johnsy and today’s question is: how much money do I need to invest in property? Well, yeah, there is a minimum amount that you need for investing in property but regardless of how much money you have, you should always set a budget to what you feel comfortable with and how much per property. Costs- total costs with- that you have to bear in mind will also include the price, legal fees, your stamp duty, any furnishing costs, any agent, admin fees or reservation fees, mortgage arrangement costs, any other costs that it may- that you may incur in order to get the property rented. So, you need to bear in mind these costs as a whole, don’t be attracted just by a price. So, in some cases, furniture may be included. Some developers may be offering to pay stamp duty sometimes.
The first thing you need to decide whether you’re paying mortgage- paying cash or you want to take out a buy-to-let mortgage. Really, the baseline is different for both. So, obviously if you’re buying cash, cash properties, decent cash properties in decent areas, you can get from sort of £55k upwards, that’s UK pounds but we’d advice at around £75k for complete buying costs. The more you move from £55k to £75k you’re going to be getting a better property and better option. If you’re mortgaging, you need to bear in mind that we’ll base this on a 25% loan-to-value mortgage and you really you can get things as cheap as £25,000-£30,000 all-in. However, those may be more difficult to mortgage and you may be paying slightly higher mortgage costs so we would advise a budget of, £55k-£60k would be great, anything of that and above to pay for everything you need in order to get that property rented.
Just a little bit of advice here, pick a property to suit your budget, not pick a budget to suit your property. Make sure that you get what’s within your comfort zone and that you’re happy with, it’s not worth the sleepless nights, property investment should be an enjoyable thing. If you can’t source a suitable property within your comfort zone then either keep looking or wait until you create, raise enough capital in order to get what you want. Don’t just go out there and buy something for the sake of it. Not all property will make you money, so be aware that out there, particularly on classified listings online that have been on there a long time, they’re there for a reason and that is because nobody wants them.
Always keep yourself some capital aside as well. A lot of people will go to the red line and then if they have a void or a bad month, they haven’t got the money to cover that. Cash is king, make sure you’ve always got some cash available to spend on your property investment, and thank you for watching Ask Johnsy.
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