Knowledge is Power and with property investment it is vital to understand all aspects of the investment. You need to understand the market that you are investing in, the economic conditions of the country and the demographics. When you are considering a particular development you need to consider who already lives in the area, who will be your potential tenant or future buyer, what is the ceiling price paid in that area. Is there a demand for property in the area? Carry out strict due diligence, if buying off-plan research the developer, are they well established? Have they built similar developments and were they successful?
You need to consider the level of risk that you are willing to take. Investing in a regeneration area may be more risky than investing in an established area but it could produce higher rewards. Decide on your investment strategy, how much are you willing to invest and are you looking for a long term steady investment or a quick return?
You cannot look at the purchase price in isolation. There are other factors to consider such as taxes and duties, legal costs, valuations, ground rents, service charges, lettings and management fees, insurance, furnishing costs and maintenance. Advertised gross rental yields can be very misleading and it is vital to look at the net yield of an investment after having taken into account all of these costs. It’s important to understand what costs will be applied and when they will be required.
Financing a property investment is key and you should consider all the options that are available to you, there are lots of different lending products available to investors and this should be chosen with the type of investment in consideration. You should also understand the political and legal situation and be aware of any changes in regulations that could have an impact on your investment. It’s important to understand ownership, is the property leasehold or freehold? If leasehold, you need to be clear on the length of the remaining lease term.
When purchasing an investment property you must remain dispassionate about the property itself. Unless you are planning on staying in the property you should not worry about whether you like it or not or whether you would be happy living there yourself. You have to consider whether the property is a good investment and will be appealing to your target market in order to be successful.