4 Myths About Property Investment

When it comes to investments of any kind, there are a lot of strongly held opinions to be found on the internet. However, as with anything found online, these should be taken with a pinch of salt. Working in the property market for the past ten years, we’ve heard our fair share of these misconceptions from people who are interested in property investment, which is why today, we’ll go over four very prevalent myths that can hurt your investment efforts.

Read on to discover how to separate fact from fiction when it comes to these common misconceptions about property investment.

 

1. Property flipping is profitable and achievable everywhere

 

“Flipping” property refers to the idea of buying a flat or house that is a bit worse for wear and renovating it quickly in order to sell it on for profit. In order to flip a property successfully, you have to have a good understanding of what your potential buyers need and want from a property like yours so that you can renovate it in ways that will make it more appealing to them. 

Property flipping is a popular practice because it’s a short-term strategy that can generate a very nice return on investment. However, property flipping isn’t something that can be done just about everywhere. Here at Cox & Co, we have a lot of people who come in to ask our opinion on the profitability of flipping property in Edinburgh and we have to explain to them why property flipping isn’t something we readily recommend to our investment clients in the Edinburgh property market.

The thing about flipping property is that there are only so many properties suitable for flipping in any given city and in the case of Edinburgh, the flats and houses best suited for this type of property investment were “flipped” about a decade ago. There are only so many front doors in Edinburgh. The houses in Scotland’s capital city are old and often not suitable for the kind of flipping people are looking for. 

For example, many people are looking for en suite flats on the Royal Mile to transform into holiday lets. What they don’t understand is that there are no en suites in Old Town, as these houses were built hundreds of years ago. These flats are also often on the smaller side, making installing one a challenge.

If your heart is set on property flipping in Edinburgh, manage your expectations and look for property in up and coming neighbourhoods where there are still many flats that could benefit from a little TLC. Areas like Leith and Gorgie would be good ones to look at. 

 

2. Renovations always increase property value

 

Whether it’s for flipping a house or selling your investment property, renovations don’t automatically increase the value of your property. This is because some renovations cost more than the value they add to your property, meaning that you’ll be left in the negative when it comes to your investment into renovations. 

In some cases, your renovations can actually subtract from your overall property value: expensive renovations highly customised to your specific tastes might seem like a dream come true for you, but put off potential buyers.

Not everyone has the same taste, and your classic new farmhouse kitchen might not make your property any more appealing to a buyer who’d prefer a sleek, modern kitchen. In general, buyers don’t expect to buy property that is 100% in pristine condition, and many would prefer to make renovations according to their own tastes.

Some of the best types of renovations to raise the value of your property include improvements to its energy efficiency. With people being conscious of their energy use both for financial and ecological reasons, something like improved insulation, sealing off any drafts and updating to double-glazing could do wonders to your property value. 

Another good way to renovate your investment property to increase its value is to address any structural issues like rising damp, structural cracks in walls or a leaking roof. A word of warning, though: opting to make these renovations yourself instead of leaving them to the buyer of your property could make a sizeable cut into your profits.

A lick of paint, new doors and handles for kitchen cabinets or new carpet are all relatively cost-effective ways to increase the “curb appeal” of your property. They may not increase the value of your flat or house exponentially, but they can help entice would-be buyers to appreciate the potential your property has.

 

3. You need a large amount of money to get started in property investment

 

Investment of any kind is often seen by the uninitiated as something reserved for people with a very high net worth, and the image is often completed with a monocle, a top hat and a fat cigar. This couldn’t be farther from the truth! In reality, you don’t have to be part of the 1% to start building your property portfolio.

There are many ways to get started in property investment without a large lump sum. These include a good number of different joint venture opportunities. If you have the experience but are short of capital, you could always ‘buddy up’ with another investor or five to buy an investment property together. 

If you need to boost your savings with a loan, consider if there is someone in your family or circle of close friends to help you get a deposit together. Make sure to make things official and legally binding with paperwork including payment due dates, an interest rate, and what ownership, if any, your lender will have in the property. And remember that at the end of the day, your loved ones are far more important than money, so consider carefully what kind of a risk a loan like this could pose to your relationship.

If you’re serious about property investment and want to build up your investment pot yourself, get creative! Start a side hustle, set up a direct debit into your savings or rent out a spare room in your home. You could also see if you’d be eligible for a loan on top of the mortgage you have for your primary home or if there’s a microlending fund that would suit your needs. 

 

4. You need a lot of extra time to get involved in property investment

 

Hunting for the perfect property, negotiating a deal, making renovations and managing a rental property can all take a lot of time. However, there are ways around this. Investing in property can be a very hands-off experience if you want it to be and work with a property investment manager who can provide you with a complete service.

Of course, this means you don’t bring home 100% of the profits you make, but working with knowledgeable industry professionals can eliminate a lot of headache from the process, especially if you already have a good deal of other commitments. 

A full-service property investment manager can help you maximise your profits by advising you on ways to raise funds for your investment, finding you the most suitable properties, negotiating deals for you, advising you on the best mortgage products and acting as the property manager for buy-to-let flats and houses. 

 

Support for property investment in Scotland

 

At Cox & Co, we offer a complete property investment service which allows our clients to feel confident with their investment whether they’re seasoned in the property markets or investing for the very first time. If you’d like to discuss your options for property investment in Scotland’s central belt, get in touch with our experts here. Make sure to also check out our guides to property investment in Edinburgh and the best areas to buy property in Glasgow.

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