By Andy Foote, director of SevenCapital
Over the years, the idea that there is a ‘prime’ time to enter the Buy-to-Let market has emerged. Characterised by the perfect combination of attractive interest rates and affordable – yet growing – property prices, this prime investment time would hopefully align with an investor’s specific financial plans, allowing them to maximise returns.
But if the past 12 months have taught us anything, it’s that the property market can thrive in some of the most unexpected situations. While the UK was in the midst of a global pandemic and its eighth recession, the property market made history with an average property price of over £300,000.
With this unprecedented growth, it begs the question, is there a ‘right’ time to invest in property? We all know that property investment is a waiting game and potentially more lucrative on a long-term basis, so establishing the right time for you is arguably more important than timing the market.
Financial Position
More often than not, making money is the main goal of any investment asset and the root of any portfolio. Establishing your financial position is a crucial part of the Buy-to-Let process – put simply, where are you now and where do you want to be? By establishing this early, you can build incremental milestones into your plans, which can provide a more personalised, accurate timeline for you, rather than trying to time the market.
When considering how much you can afford to devote to your Buy-to-Let portfolio, you should also think about the other aspects that come with this investment avenue, such as tax and mortgage payments. These added expenses, combined with the extra responsibilities that come with being a landlord, highlight the importance of staying well within budget.
Instead, gradually scaling a portfolio is often a more effective route to building a substantial passive income. This approach can also make your long-term goals more achievable, providing diversity and growth potential while reducing the risk. It’s important to remember, the more properties you have, the more exposure you’re open to – gradually scaling can help you build in a sustainable way.
Once you know your current financial position, and where you want to be in the future, this will give you an idea of a specific time frame to work off and when you need to begin your Buy-to-Let journey. There are many tools, such as the SevenCapital Investment Calculator, that give investors an idea of where to begin and what to expect further down the line.
Your Portfolio
If you’re already an investor – whether that be hands-on or hands-off – you’ll probably already know Buy-to-Let property typically offers better performance over a long-term basis. But if you’re looking to invest in more assets, you should consider your existing portfolio and its performance beforehand.
If you have goals of achieving financial freedom further down the line, you’ll want to diversify your portfolio to maximise the chances of achieving, or even surpassing, this milestone. A diverse investment portfolio can be achieved in many different ways, from a combination of property types, such as houses and apartments or residential and commercial property, to investing at different price points.
By ensuring you have this level of variety within your portfolio, you’ll be able to appeal to a wider range of tenants, which in turn, could reduce the risk of your investment and make it less vulnerable to fluctuations in the market. The changes we have seen in tenant demand over the past 12 months emphasise the importance of a robust portfolio, especially with the unexpected transition towards more suburban spots and bigger properties we have seen.
For investors with an empire made up of different locations and/or property types, these evolving tenant demands would have had much less of an impact on the performance of their portfolio. As a way of boosting the longevity of a property empire, considering your portfolio and diversifying can often lead to more successful investments than waiting for a perfect market.
The Future
The ‘right’ time to invest in property should be more dependent on your personal finances, but the future should also be a key consideration. This ties in with the previous factors, with your long-term milestones and property forecasts having the ability to influence your portfolio in the coming years.
The past 12 months has accelerated the property market, in terms of technological advancement and changing tenant demands, which is being reflected in subsequent property forecasts. With more suburban hotspots, such as Bracknell and Slough, soaring through the ranks and offering more options for those building a portfolio, there are now even more opportunities for investors to identify potentially lucrative investments
But your long-term goals should always be at the centre of your investment plans, which can often make your decisions much more manageable. For example, if you have intentions of investing for an early retirement further down the line, you’ll likely look for emerging property locations that are undergoing extensive regeneration. By investing in these areas, you could benefit from natural capital growth for many years to come, as well as more affordable entry prices.
So, whether you’re an existing investor or are looking to embark on your first property investment, it’s important to remember that the ‘right’ time is unique to each and every investor. As we have seen over the past year, the UK property market is resilient, to say the least, and with other factors, such as your financial position, portfolio and the future, typically being more influential on a successful portfolio, these considerations are key.
