How to Save to Buy an Investment Property

Investing in property is one of the most intelligent ways of improving your financial status. 
However, putting down a deposit on a house or flat is easier said than done; it requires you to have access to particular funds at the right time – plus, the amount you are able to save before you purchase a property may determine the net amount you will come away with.

Primarily aimed at UK readers, below are some tips that would resonate for anyone in the world looking to save for an investment property, courtesy of the quick house sale experts at Property Solvers.

  1. Look into ISAs

One of the best ways in which you may see your money grow is by speaking with your bank about a relevant Individual Savings Account. ISAs offer tax-free interest payments, which means you’re likely to see a greater return on the amounts you deposit.

The type of ISA you should open depends on your status as a prospective homebuyer and on when you wish to buy your property.

Some ISAs work on a fixed-term basis, meaning you won’t be able to access your savings until a certain date. Others allow you to withdraw your money whenever you need it.

  1. Aim for a good-sized deposit

Try not to jump the gun by purchasing a property as soon as you’ve saved the minimum amount required for a deposit (which can be as low as 5% if you aren’t buying to let).

If you’re planning on getting a mortgage, the larger the deposit you’re able to put down, the smaller the monthly payments you’ll have to make. A larger deposit also means that you’ll own more of your house from the off, so your return is likely to be greater if you sell soon.

Remember, buy to let mortgages often require a minimum deposit of 25%.

The type of mortgage you’ll be able to achieve will depend on your credit rating, so it’s a good idea to check your score and make any necessary improvements before applying for a mortgage so that you’ll have a wider range of options.

  1. Think about other potential costs

Whether you’re planning on buying to let or you wish to refurbish or improve the property you’re buying in order to then sell it for a profit, your deposit and subsequent mortgage payments won’t be the only expenses you’ll have to cover.

You’ll need to find a conveyancing solicitor to handle the legal aspects of your transaction, plus there will also be costs involved if you’ve used a mortgage broker. You will be required to insure your new property too. 

Research the estimated costs of each of the above to ensure you’re able to save enough.

You should also try to estimate what it will cost to repair and furnish the property if required.

  1. Put away a set percentage per month

When you’re ready to start saving, why not set up a direct debit to transfer money straight into your ISA – or any other account you’re using to save for your property – once you’ve been paid each month?

The best way to do this is to work out accurately what percentage of your wage you’ll need for your current set expenses – such as rent and bills. On top of this, you should consider your budget for other outgoings. 

This includes food and drink, subscriptions and memberships, clothing and toiletries, household products, transport, socialising and any other costs. Ensure that you’ll have enough each month to get by, then set up regular payments of the remainder into your savings.

We recommend putting away 20% per month, but this depends on all other demands on your money. Don’t be too strict on yourself; you need to be sure that you can afford to live comfortably.

  1. Cut back on unnecessary outgoings

Check your direct debits and standing orders. Do you have a gym membership that you rarely use? Do you subscribe to a service that you aren’t finding helpful? Do you really need this particular phone contract? 

These little outgoings can add up, so why not downgrade or simply cancel them altogether if possible? You can always pick things up again when you’re no longer saving.

When you’ve reached your target, it’s also very important to choose the right property. Up and coming areas with green spaces and excellent transport links will always be the best places to invest in houses, flats or bungalows. Proximity to schools and shops is also highly beneficial.

For your first property, we recommend picking one that requires a simple cosmetic upgrade but no major work. This is a way in which you can greatly increase a home’s value without overspending. 

Take note of any potential structural problems as these may prove extremely expensive to rectify.

By following the tips above and being sensible with your investment when the time comes, it’s likely that your purchase will be a success and that you’ll see a considerable return.

Categories: Investment

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January 8, 2020 How to Save to Buy an Investment Property