How to Buy The Right Investment Property
- The Millennial Millionaire
- Jan 23, 2018
- 3 min read
Buying a property is a huge investment, so you want to make sure you buy the right one.
But how do you know whether a property is going to be fruitful, and when should you put that money down?
In this post I'll share the most important things to look for when buying property.
1) Population Trends
The single most important thing when looking at property is often overlooked.
It's basic economics, when demand goes up, and supply can't keep up, price has to go up!
This is why you should look at population growth of cities, it's simple to Google and tells a lot.
Fortunately, population growth is very slow moving, for example, living in Peterborough, the people around me dream to live in Cambridge.
Cambridge has seen huge population growth, and there's not enough housing to keep up.
As a result, the house prices between 2010 and 2016 rose nearly 50%. The demand will only continue to increase in coming years.
2) Amenities
When you delve into the market, being local to particular things are very important for people.
For example, in a HMO, bus stops, shops and being relatively central are absolutely key for ensuring the demand for the property and the rooms within remain high.
When it comes to seaside towns, nobody moves to the town to be 30 minutes away from the beach, ideally you want a beach-side property or something a few minutes away at the most!
These are not only important for the capital gain on the property, but also to ensure rental demand remains high and you avoid void periods in your property.
3) Schools
If you buy in an area with good schools, it's hard to go wrong, especially if you're close by.
Parents want what's best for their children, and most of the time this means good schools. In fact, good schools have a huge impact on house prices.
I think we are all aware of families who have moved house while their children are of a particular age just to get into that 'Outstanding' middle or secondary school.
It's only natural.
4) Return on Investment
When considering these points, it's very easy to forget the most important, return.
At the end of the day, this is an investment.
You could find the perfect location, with schools, high growth and limited housing, close to shops and amenities.
However, if it loses money after tax, it's a no go.
You must always invest for cash flow, not capital appreciation.
If you rely on the latter, the next crash will ruin you, whereas if you invest for cash-flow you can set up the passive income stream and enjoy the fruits of your investment.
5) Buy Below Market Value
When you buy a property, you can be 10-15k in the green right off the bat.
You should never pay market value for a property.
If you find an area you're keen on, use the tools available in Rightmove and Zoopla.
Get a feel for the prices of property, then try to undercut that by at the least, 10%.
This gives you a head start straight away.
That money saved on a £250,000 property (market value) is £25,000, which the majority of the population would have to work more than a year to have in take-home income.
6) BE PATIENT
This is quite possibly the most important step.
You NEED to be patient.
The right property may come along after viewing 100 or even 1000 properties, you just have to wait until you find that one, after all it's a huge investment on your part.
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If you want to know how to optimise real estate return, I made an article on HMOs that tells you just how to do that, with yields between 20-30% that you can find here.
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