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Considerations when buying investment property

Thursday, 9th January 2014

Categories: Property Prices Sales

Author: Kris White

When buying investment property it’s key to understand all of the details. This is because you want to make sure that the asset can generate the best return possible. However, even the most professional investor can suffer if he/she doesn’t consider certain important factors – just as more amateur investors can actually succeed if they think carefully about their purchases.

Here are five things to bear in mind if you want to ensure you make the right considerations when buying investment property:

1. Buy at the best price

Buying property at the right price is very important when thinking about investing.  Whether commercial or residential, it’s vital to focus on ensuring you purchase the right property at the right time and that you make a good decision financially. This is because you need to think about the worst case scenario. If everything goes wrong in a year can you be sure you won’t lose any money? Well, nothing’s guaranteed in life, but you can certainly minimise the loss. If you’re convinced that you can sell it to someone else at the same price and that’s your worst case scenario – this is a good investment. However, if you overpay for something, this could be worrying if the value of your asset falls in the medium term.

2. Comparing like with like

If you’ve found a great investment prospect, be sure to compare it to other properties that have recently been sold. When you make this comparison, remember that no two buildings are ever the same, but at least you can get a rough idea. It’s one of the key considerations when buying investment property.

3. Condition of the property

Remember to check the condition of the property. This is because if it’s in a bad state, you could increase your return by renovating it and selling it for a profit. Equally, you need to be careful that you can afford any repairs.

4. Void periods

If you buy a property to rent it out, remember to calculate void periods. Can you afford them? Can you even easily cover the rent through the income you get? Make sure you budget effectively so you don’t get caught out by unforeseen empty periods and/or interest rate rises. Following financial news can always help – so you can be aware with how the market’s faring!

5. Location

It may sound obvious but remember that location is a very key thing to consider when you buy property. If it’s in the right part of town, near amenities and has good transport links, it’s obviously going to be a better bet than something a little further out and isolated, unless it’s a very large estate that you could evidently do up and sell on for a profit easily.

6. The cost of inaction

The money that you’d invest into the property must be sitting somewhere now. Wherever it’s sitting, it must be making some kind of return (unless it’s stuffed under the mattress haha!) The point is: can you make more money on the investment than you can with it in the bank or wherever it’s invested? If you’re sure you can, then go for it!

These are just a few tips to get started. Remember that research is vital – leave no stone unturned!

Thanks to Paramount Investments for this guest blog.