This is the first step in the process of investing in property.
What do you want to achieve with your property investment:
Do you want to get shorter-term returns? Do you want to get rental income? Are you perhaps more focused on long-term capital gains? Do you want to have a combination of good rental income and strong potential for capital gains?
These are some of the questions you have to ask at the outset.
Let's look at them all individually.
For this, we will use the shorter term as less than 24 months. In a healthy upwardly moving market, this is a relatively easy play to make. You buy something, the market moves up, and you sell. This is the simplest and easiest format. You have not added any value, and you are not in control of the market.
An improved and more reliable version of this is to find an undervalued property, where you can add value for significantly less than what it costs. Small renovations like painting, updating and face-lifting kitchens and bathrooms, improving "curb appeal" can significantly improve value as well as the size of your potential market. Doing this tactic allows more control of your outcome, you are starting ahead of the race.
-- For those interested, I am happy to write about the most cost-effective ways to add value to property --
With this type of investment, your focus is on your buying fees, your improvement costs, your selling fees & your exit price. All of which you should know as accurately as possible before you make your offer.
Good old cash flow, for many investors this is a good starting point. You find a property that has good market value in relation to its potential rental income, and just manage the property alongside a good Lettings & Management agent.
With this type of investment, you will focus on two key things, your rental income minus your operating costs (Landlord Insurance, Maintenance, Management Fees, Service Charge etc.)
Know what is coming. If you are looking to invest for capital gains in the long term, you need to understand what is happening in the surrounding neighbourhood. Location knowledge is essential for all forms of investment, but for capital gains, location is your primary factor. Look for areas where the area is improving, where adjacent neighbourhoods are going through significant transformation, where infrastructure improvements or regeneration is planned. These factors will make the area more attractive to buyers and tenants in the future, so even if the broader market remains flat or has very little growth, local factors make the area outperform the more general market.
With this type of investment, you will focus on Location, buying fees and area improvements.
Capital Gains & Rental Income:
A favourite of many successful investors. Combining an excellent rental strategy with a well-devised capital gains plan can be highly rewarding. Take the elements you need for an attractive rental property and search for that property in areas with excellent potential to outperform the general market.
With this type of investment, you will focus on both the elements of an excellent rental property and that of a superb capital gains property.
What do you want to look for in all of these types of investments?
- Exceptional relative value.
- A decent location.
- Matches your budget.
- Meets your outcome requirements.
- A detailed and thorough inspection.
With this information, you are better able to decide what you want to achieve with your property investment.
If you have any questions, please comment below or contact me directly.
Next, in this series, we will look at how you decide how much you want to invest.