How to Climb The Property Ladder Like a Pro
Very few of us can afford to buy the home of our dreams right off the bat. Instead, our first home tends to be a less desirable property; perhaps one that is smaller than we’d like, or older or in a less desirable location. However with a little luck, over time the value of our property will rise, allowing us to leverage our equity and move up to a larger property. Such is the property ladder.
But with property prices rising fast, yet highly volatile market conditions, how do you really win the property game these days? Are there some proven strategies that can help you to maximize the value of your current home and climb the property ladder like a pro?
As it turns out there are three major factors that will affect how quickly your home rises in value – and hence how quickly you can afford to climb the property ladder.
Buy In an Upcoming Area
They say that a rising tide lifts all boats, and in the past too many home owners have fallen foul by not fully understanding this concept. If the value of your property has risen purely as a result of market conditions, then the money you've made is in many ways imaginary.
After all, if you opted to sell your property, you might get more money than what you paid for it. On the other hand, all the potential properties you’d like to buy are also now more expensive – maintaining the gap between your funds and your dreams.
But there is a way to leverage a rising market and still make real money from it. And that’s by purchasing a property in an upcoming area. These property hotspots typically see far higher growth in property prices than the rest of the country.
Relative to the country as a whole therefore, buying in an upcoming area really can see your investment rise significantly in value. But how do you spot an upcoming area that has the best possible chances of rapid and sizeable price increases?
There are four tell-tale signs that might tell you an area is on the up. Firstly, look at the outskirts of areas that are already popular. Over time, population density and the insane property prices in the centre of the area will push buyers out to the outskirts. At this point, it is normal for prices in these areas to also start rising.
In towns and cities another great indication that property prices may be on the rise are signs of new transport links such as major new roads or railway stations that can make getting to work far easier.
In a similar vein, major employers moving to an area will also draw in all manner of new residents to the area. Seeing as property is largely a game of supply-and-demand, a new employer in the area will mean more competition for property, so generally prices will rise as a result. That means that a multinational corporation opening up a new office in your neighbourhood could be very profitable for you.
One final indication of an area that is gaining ground are signs of regeneration. Properties being tidied up, new infrastructure, town centre regeneration schemes and suchlike are all good indications.
So you've located the next likely property hotspot in your area? Great, the next step is to find a property where you can really add value. Some years ago that meant buying a property that was in good structural condition but just needed some cosmetic repair. And while these properties will often yield the highest returns, they’re also getting increasingly difficult to track down. Everyone else, it seems, has had similar ideas over the last few decades.
But if you can’t find a proper fixer upper, there is no need to lose hope. Instead, go shopping for your property while thinking about “potential”.
It’s a clichéd phrase in property circles but one that is very apt here. You see, even well-tended homes can be increased in value with some carefully managed home improvements.
For example, according to Tapco Basements a loft conversion can add 12.5% to the value of a property, a standard extension averages an 11% return while adding a conservatory can add 6.7%. Most profitable of all is a basement conversion which can add an astonishing 20% onto the value of a home.
So keep these opportunities in mind when shopping for property. Check out the neighbours to see what they've had done and buy a property that is ripe for the kind of improvements mentioned previously. See, they really do have potential when you know what you’re looking for ;-)
One final topic of conversation is money itself. By offering your bank the biggest deposit you possibly can you’ll not only increase the size of the mortgage offered up (meaning a bigger property) but you may even pay less in interest on the loan too.
Keep that credit rating moving in the right direction by keeping up with all your credit payments and paying them down as smooth as possible so that next time you need a mortgage (or re-mortgage) you’ll be offered the largest mortgage at the best rates possible.
About Paige Hawin
Coffee addict, hockey player and F1 fan. I also love to develop property here in the UK.