What to Look for in an Investment Property

The three key components of a great return

There are thousands of viable properties on the market but when you’re looking for one that will give you a great return on your investment, there are three key components to assess:

Location

This is perhaps the single most important consideration to make when investing in any sort of property and should be researched thoroughly; whether you plan to resell or rent, location will dictate your success.

Consider how close a property is to desirable schools or universities. Research by Lloyds Bank showed that parents are willing to pay an average property premium of £21,000 to live within a high performing school’s catchment area.

While it’s unlikely that significant returns can be achieved in well-established school regions due to high purchase prices, properties in areas where schools are ‘up-and-coming’ could prove very lucrative. You can check the performance of schools online with Ofsted.

Look at how easily transport networks are reached, whether the property is near sources of employment and what the neighbourhood crime rate is like.

These things matter to the potential buyers or tenants of your properties and understanding them will help inform the following decisions you make about whether to invest and who you should market your property to, to get the best return.

Tenancy or Resale

What do you intend to do with the property once you’ve bought it? Having a clear strategy helps develop plans for a profitable resale or rental.

Buying a property with the intention of selling it on quickly at a profit can potentially be very lucrative, however the housing market is currently dominated by renters.

According to the Office for National Statistics, home ownership declined for the first time in a century between 2001-2011 during which time the number of rented households grew by 1.6 million and “occurred entirely within the private rental sector.”

Demand among tenants for quality properties is at an all-time high and could mean sustainable long-term growth for buy-to-let investors.

Understanding what kind of capital growth or rental yield a property can provide after costs, such as mortgage repayments, tax, insurances or renovation fees will help you to judge whether a tenancy or resale could give you the greatest return.

Adding Value

Once you know who you will be marketing your property to, you can decide how to add value to it to achieve the maximum return on your investment.

Often, value can be added to a property with relatively simple renovations or refurbishments but as an investor, any expenditure should contribute toward your overall plans for a return.

For example, if you intend to resell, a cheap new kitchen or bathroom may make the property desirable and help secure a buyer now, but if you plan to become a landlord and let long-term, investing in high-grade, durable fittings will limit the potential for further refurbishment costs in the future.

When calculating the cost of refurbishments remember to budget for skilled labour, materials, the loss of any rental income while developments are in progress and any ongoing maintenance expenses.

There are, of course, other things to look for in any investment property; securing premises at below-market value is one of the simplest ways to grow capital quickly and is just one of the many benefits you can enjoy when registering your interest in property investment with National Property Portfolio.

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