How to manage risk when investing in property


We all remember a time when property was considered the safest and most lucrative investment of all. The idea that property prices in Ireland were bulletproof helped drive one of the most historical bubbles since the Dutch went crazy over tulips.

I won’t get into what happened next, but house prices have recovered and thankfully are now considered a great investment again, especially with such low-interest rates.

So how do you feel confident enough to speculate without forgetting the lessons of the past?

The answer lies in employing some low-risk strategies, and we’ve listed 5 of these below.

It’s important to note these are not no-risk, but all going well, they will shield you from the worst of any sudden downturn.

1. Get the right sort of tenants in
Great tenants are the key to a long, happy life as a landlord, and the reverse is also true, as bad tenants will be the bane of your life.

So, ensuring your tenants have verified references and the means to pay are essential.

If possible, you should also vet them in person. Getting to know them will give you more of a feel of what kind of tenant they might be.

Combining your gut feeling, with a robust vetting process should result in a long-term let where both parties are happy, and your income is protected.

2.  Insure against the bad ones
Following on from this, the best vetting in the world may still not be good enough, and you could end up with a non-paying or destructive tenant.

Apart from the emotional element here, the worry over loss of income is every landlord’s worst nightmare.

However, there are buy-to-let insurance plans out there, and it goes without saying that the more properties you are letting out, the more worthwhile it will be to offset any problems.

It will usually kick in from once the tenant stops paying, until the issue is resolved, but as with all insurance policies, check the small print first.

3. Don’t rush in with too high a bid
Buying at the right time is a tricky art, especially if you’re not a particularly patient person, but it’s important to remember that every euro spent on one side will need to be made back on the other end.

So, it’s essential that you do the research into the location or rental demand that may be in the area.

Accumulating this research will better inform your pricing strategy and give you a better negotiating position.

4. Stay in it for the long haul

Negative equity is not a pleasant experience, but it doesn’t mean it will last forever either.

Look at a property purchase as a long-term investment. You can be sure any property now is worth more than 20 years ago if not 10. So, look to the future for you decide to cash in.

That’s why it always important to not overstretch yourself in the here and now. Stick with your investments, and you’ll eventually reap your rewards.

5. Factor rate rises into your budgeting
European interest rates are reaching into the negative at the moment, which is an amazing stat. The economic reasons may (or may not) be sound for this but remember that interest rates can rise as well as fall too. They were in the mid-teens in the 1980s!

This means you should always factor in any knock-on effect of a rate rise to your monthly budget. Otherwise, you could end up getting less rent in than you’re paying out for your mortgage. So, always add a bit of fat to your rent to safely cover unexpected interest rate rises.

To conclude

While the property market can give you a great source of passive income and reward, it’s not always going to be a bed of roses.

Like all investments, having a good plan, not overstretching yourself and sticking it out for the long-term is key to managing your risk.

Here at Platinum Property, we’re always happy to help with any part of the property process. Click below to find out more

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