How to find a good investment property
Finding a profitable investment property takes time, research, good connections and a dose of luck. Here are some tips to find a good investment property:
How long are you planning to own the investment property?
Before you start your investment property search you should have a clear idea of how long you want to own the investment property.
Long term property investments will more than likely require major repairs and improvements to the property structure, as well as internal makeovers to stay appealing to tenants as styles change over time. However, long term property investments are likely to return greater profit as the property market increases over time.
Short term property investments (below 5 years), however, should require much less work and maintenance as the aim is to avoid improvements unless recouping the money from a higher sales price is likely. Making profit from short term property investment is more risky.
Stay ahead of the game
Developing a network of contacts is crucial when buying investment property.
Get on the contact list of major property developers, estate agents and anyone else involved in the property market, including other property investors.
Some landlords also run adverts in local newspapers, or door-drop letters offering cash sales for properties - therefore avoiding estate agent commissions.
Make sure you personal finances are in order
Mortgage lenders often require larger deposits (20%+) and then offer higher interest rates for when arranging a Buy to Let mortgage so the better your credit the better change you have of getting a decent mortgage.
Some property investors also have cash reserves in case major repairs are required on their investment properties. Also have adequate insurance.
Do not over pay for your investment property
The golden rule of property investment is that you determine how much profit you make when you buy the property - not when you sell it. If you pay over the market rate for the property in the first place it will be likely to be an extremely long time before you see profit.
Check a good buy to let mortgage calculator, or seek advice from a financial advisor to make sure your investment calculations add up.
Will my investment property be enough to retire on?
Well, this is the million dollar question! Property values can fall as well as rise over time, so profit from property is no guarantee. The best advice would be to diversify your investments. See our property or pension article.