Investing in property is usually a surefire way to get a healthy return on your investment – right?
In most cases, yes, but you want to do everything possible to ensure that you gain an incredible passive income, whilst looking for the best deals so that you don’t make a loss on your initial capital.
I’ll be suggesting a few points that should be looked into to ensure that you have peace of mind and surety throughout the purchase process.
Buying An Investment Property! – The Ultimate 5-Point Guide
1. Ensuring Growth Of Your Investment Capital
It may be a tricky starting point but envision how long you plan to own the property, with a judgment on a rough percentage of how much the overall value will increase in that time. As this will contribute towards the overall return on investment. If the value once you come to sell up drops, you’ll have to factor this into your overall profits which could make a dip in it as a whole.
2. Calculate Your Rental Yield
In simple terms, a rental yield is an annual percentage of the projected return you’re likely to receive on your investment, and working it out is easy!
(Annual Rent ÷ Property Purchase Price) x 100 = Gross Rental Yield
Example (£15,000 ÷ £300,000) x 100 = 5%
It’s always advised you calculate your rental return yield to give a general perspective on whether the rental factor will be a lucrative investment or not. For a deeper insight speak with us to get a better idea of the ins and outs.
3. Research The Demand In The Area
The type of property, the type of ownership, the area it is situated in, risks of flood or asbestos, etc are all contributing factors to consider when looking to buy an investment property. A reputable letting agent will be able to give you impartial advice regarding these points and allow you to make a judgment on whether it will be a good buy, or not.
4. Be Cautious of Major Negative Factors
Things such as steep gardens, difficult access, and busy and polluted areas, are likely to put potential tenants off. It could leave you in two potential situations, one where you are in a void period with a struggle to find willing tenants, and two, where your tenants are living in the property but wanting to leave a short while after due to not being able to deal with these factors long-term.
5. Check The Energy Performance Certificate
For over 10 years a valid EPC has been required to rent out a property in the UK.
Then in 2018, the Minimum Energy Efficiency Standards were put into place, requiring all properties being let or sold in England or Wales to have a minimum rating of ‘E’ or above.
There are proposals to have this tightened even further so that the minimum standard be bumped up to ‘C’ or above by 2025.
Have a look at the EPC register online, where the assessor will have made suggestions on what works to carry out to improve the overall energy efficiency for the property.
Yeah, there’ll be plenty more to consider that will vary depending on the circumstances, type of property, type of mortgage, etc. With so many variable factors you’ll likely encounter surprises along the way.
Remain open-minded going forward and embrace the encounters you’ll inevitably face, it’ll make you a more rounded individual if you should ever have to deal with these issues again for potential future investments.