It is all in the purchasing of the property at the outset of your investment journey. This article will show you how to pick the right house for a lucrative future in property investment.
Property, a time-tested investment, offers substantial rewards. While it's not without its downsides, risks, and pitfalls, the potential for healthy returns makes it a compelling choice for your money.
The reason for this is twofold: on the one hand, the property is likely, if you hold onto it for long enough, to increase in value over time. Additionally, the property itself is an income-generating asset that you can earn revenue from renting it out. There are many ways you can generate income from a property, but in this article, we will be looking at a traditional long-term rental, as this is the most common option.
But it isn't as simple as buying a property and renting it out. Of course, it could be that simple, and you would probably be fine, but there are things to look out for that can really make that investment work for you, maximising the income and giving you great returns.
Location: It is said that location is the most important thing when choosing to buy a new home. But, is it as important when purchasing a property for investment? The answer is yes; where the property is located is still a significant consideration, but it has very different parameters. It's not necessarily relevant if you like the area, but rather whether tenants like the area. Is there a market for tenants living in this location? Are there good facilities and amenities for tenants, such as transport links or leisure facilities? Consider employment in the area, for example, close to industrial areas, amazon warehouses, or hospitals. Places that employ a large number of people will be of interest so that those employees can live close to work.
Potential tenants: If not many tenants live in a particular location, then it is not likely to attract a healthy rental income. Consider who might live in the property, where might they work or would want to live close to? If the area is predominantly made up of large, owned family homes, then it perhaps won't make the best rental investment.
Income vs expenses = profit: It is crucial, when buying a property for investment, that it is an investment. Will the property return a profit? Unless you are investing in property for different reasons, the majority of investors will be looking for the property to, at the very least, cover its own expenses but, ideally, generate a profitable return. Of course, there is the chance for capital growth with the increase in the value of the asset over time, but there will be monthly costs in owning the property, and most investors will look for the income generated from the investment to cover those costs. Therefore, it is essential that you don't overspend when you buy the property, stick within your budget, and know in advance of the purchase what rental income the property might bring.
Resale-ability: What is your exit strategy? Will you sell the property to recoup your money? Or do you intend to leave the property portfolio to your family in your will? Either way, whilst a bargain property might seem like a good idea (certainly property gurus are forever telling people to "buy below market value"), you must consider whether you will be able to sell the property easily in the future and reclaim your equity. In an ideal world, you will purchase a property that is a great rental investment and will appeal to buyers, too, so that, should you wish to sell the property in the future, you can do so without any issues.
Buying a property is a great investment. It is not entirely 'hands-off', but you can, of course, employ agents to manage things for you and ensure that you are legally compliant. It is also not a guaranteed profit maker. If you buy the wrong property and find that you can't secure a tenant at a rental rate that will give you a profit or can't sell the property in the future without significant price reductions, you do run the risk of not making any money from your investment. Like with all investments, there are risks involved; however, if you select the right property at the right price, it can be a highly lucrative option.
Contact our team of experts to ensure you buy the right property from the outset and secure your chances of a great investment for the future.
