The idea of purchasing an investment property is becoming more and more popular; however, it can be a confusing and complicated market to enter into. When purchasing an investment property, there a set of factors that you have to consider in order to determine whether or not you are making a worthy investment. Here, we will set out the essential factors you should look out for when buying an investment property.
Long Term Capital Growth
One of the most fundamental principles of purchasing a property as an investment is ensuring that it will make you money in the long term. It is important to research property price inflation in the area, and if possible investigate the resale of any similar properties in the vicinity. Have these properties made a profit? Have any changes been made to the property to increase the profit margin?
Knowing the potential long term capital growth for your investment property is essential; your eventual resale price will most likely be your most substantial return on investment, so make sure, above all, that you are very unlikely to lose money.
Location, Location, Location
The closer your property is to the city centre, the more desirable it will be and the more you will be able to charge for rent. This is particularly important when purchasing investment property in London, as this can increase your property’s value significantly.
Being within close proximity to the city centre, underground stations and local amenities such as bars, restaurants and supermarkets will all add value to your property, as well as desirability. Properties close to these amenities will not stay on the market for very long, meaning you can begin receiving your income from the property even sooner.
Also be on the lookout for up-and-coming areas in and around major cities. These can be the hidden gems of property investment, as the price of the property will be cheaper at the point of investment, but will increase over time as the area becomes more desirable. Look for improvements such as new public transport links and amenities moving to the area, do your research, and invest.
Ability to Add Value
A key factor when viewing properties with the intention of purchasing them as an investment is whether you have the ability to increase their value. Is there potential to add an extension? Could renovation increase the value of the property?
Some properties may have a lower initial market value due to the need for renovation that, when carried out, can significantly increase the value of the property. Make sure that, if you decide to move forward and purchase property, you have it professionally surveyed in order to determine the extent of any repairs, damage or issues such as damp and rot.
It is important when purchasing a property for investment that you understand what rental return you can expect. When viewing a property, have it professionally valued for both sale and rental.
A professional can advise you about an achievable rental price for the property and give an estimate on the value should any renovations or improvements be made to it. From this information, you can determine the percentage of your annual return, as well as whether any improvements are worthwhile.
It is important to understand these figures, as this rental return is your short term income from the property, and you will want something that will cover your monthly costs as well as any mortgage payments that need to be made on the property.
Market Competitiveness and Appeal
The investment property market, particularly in London, is highly competitive. Take time to look at similar properties on the market in your area of interest, and take note of the advantages and disadvantages of other properties.
Think from the perspective of the tenant and consider anything you could add to your property that would make it more desirable for a tenant when set against other properties in the area. Would the property benefit from a more modern design? Would your ideal tenants prefer a property with more than one bathroom? These are all questions you must consider when purchasing an investment property.
Property investment can be a difficult and confusing step to make, but with the right advice you can make it work for you. If you need advice about investing in a property, Prideview Properties can offer you advice on how to get the most out of your money. Contact us today by calling 0208 863 8680.